South Africa may fall down when it comes to enforcing its laws, rules and regulations, but the country is a dab hand at passing often extremely progressive legislation. Can we keep up this standard in the face of rapidly emerging technologies like artificial intelligence, robotics and digital currencies, which are accelerating the pace and complexity of regulation?

If you doubt South Africa’s law-making prowess then just consider that, in 1993, the Tobacco Products Control Act restricted smoking in public places, 14 years ahead of the United Kingdom and a decade before Australia. 

Reflect on the fact that South Africa is, according to Schindlers Attorneys, “A world leader in drone law, being one of the first countries to regulate the usage and enjoyment of drones.” Or ponder that the South African Reserve Bank (SARB), together with the Financial Intelligence Centre, Financial Sector Conduct Authority, National Treasury and the South African Revenue Service, released a consultation paper on cryptocurrency assets in January 2019, following its 2014 position paper on virtual currencies. And consider that the SARB’s Project Khokha initiative, which is exploring how distributed ledgers such as blockchain can be used to make payments, was recognised by the global Central Banking publication as the Best Distributed Ledger Initiative in 2018.

...innovation brings new opportunities...

At a time when fellow African front-runners like Kenya are still grappling with data protection laws, the SARB’s proactivity is noteworthy. After all, legislation and regulation are vital for economies to participate in the new, digital world. This is something Dr. Bitange Ndemo, Chairman of Kenya’s blockchain and artificial intelligence task force, highlighted at Emerging to Converging Technology: The Future World conference at GIBS in June. But regulation takes time. 

“We started developing a data protection law in Kenya more than 15 years ago,” said Ndemo. “We have been pushing to simply adopt European Union data protection law; we still don’t have a data protection law. We must have one. So, the challenge is the speed at which technology is moving, and what we see is not compatible with the legislators who are looking at their own selfish interests.”

Or, as GIBS lecturer Manoj Chiba observed at the conference: “The regulator, on average, from a technology space, is about three to five years behind,” which caused him to quip, “So we’ve got three to five years to really make a lot of money!”

In reality, it takes time to “draft, consult, agree and promulgate legislation” if all stakeholders are involved, says Leishen Pillay, associate director at Deloitte Risk Advisory. But shorter lead times for technological change and disruption are the new normal and “governments will need to respond accordingly to ensure that they do not find themselves in a situation where significant risk to the economy and individuals is left unregulated for any length of time.”

Pillay continues: “Legislative process and strong legislation play a key part in economic growth and consequently in investment. Governments need to invest time in this process to ensure that the laws of the land remain relevant and up-to-date and, consequently, that such growth is achieved.” 

Walking the wire

The challenge lies in remaining relevant and protecting citizens, without putting a damper on the uptake and evolution of new technologies. According to Pillay, this balancing act is vitally important and completely do-able with the right underlying approach to innovation. “One only needs to look at some of the major innovative countries, such as Japan, Israel and South Korea, as examples of countries that constantly seem to innovate while at the same time protecting their citizens, businesses and the economy,” he says.

Generally, says Pillay, “innovation brings new opportunities, but the adoption of disruptive technologies needs to be considered within the specific circumstances to determine if it is appropriate at a particular point in time and whether it would not conflict with other priorities or disrupt economies”.

Similarly, it’s vital that regulators don’t paper over the associated socio-economic issues, says Webber Wentzel consultant Aalia Manie. “When you look at South Africa, you may find South Africans suffer more if artificial intelligence is adopted very quickly - in terms of job losses - but at the same time if they overregulate and prevent the use of AI out of fear, we could fall behind and have a situation where foreign investors don’t want to invest in South Africa because the AI regulation is not good. It’s a very tricky one because if you over-regulate to protect jobs, you could lose jobs in another way by not having enough foreign investment.”

To ensure technology has the wiggle room to be a galvanising force in society, this also compels regulators to step out of their siloes and consider how other countries are adapting their policy regulation approaches.

...ultimately it is going to need to be a very careful balancing act...

A case for collaboration?

According to Manie, “The starting point is to get as many people in the room thinking of these [ethical] issues because there will come a point when it is too late. Where the horse has bolted it will be difficult to regulate ipso facto.” She continued to say that if she were the South African government, she would look to the United Kingdom where think tanks and policy forums are being created. “That needs to be the base because ultimately it is going to need to be a very careful balancing act,” she said.

Ndemo has also advocated an approach of sharing regulatory frameworks through, for example, a central body like the African Union. “There is a huge opportunity which the African Union can play,” he says. “We need leadership in the AU to bring Africa together.”

In reality, it’s important to bear in mind that Africa consists of many different countries using different legal systems, each with unique market conditions and various levels of development, says Pillay.

While, currently, each country around the world enacts what is suitable to their specific conditions, policy templates would imply standardisation, and minor changes to those imply an adoption of those standards by all countries, says Pillay. “While this is not currently what is happening on the ground, it would certainly ease the regulatory burden on individual countries if such an operating model could be agreed upon and implemented.”

 We need leadership in the AU to bring Africa together.

Such harmonisation would not be a quick process. And, when it comes to emerging technologies, speed is of the essence.

How to speed up legislation 

In 2018, Deloitte Insights released a report which explored the challenges around regulating emerging technologies. The Future of Regulation: Principles for Regulating Emerging Technologies report, co-authored by William Eggers, Mike Turley and Pankaj Kishnani in the United States, stressed that the key challenge facing regulatory leaders lay in “how to best protect citizens, ensure fair markets and enforce regulations while allowing these new technologies and businesses to flourish”.

The traditional assumption, they wrote, that “regulations can be crafted slowly and deliberately, and then remain in place, unchanged, for long periods of time, has been upended in today’s environment. As new business models and services emerge, such as ridesharing services and initial coin offerings, government agencies are challenged with creating or modifying regulations, enforcing them, and communicating them to the public at a previously undreamed-of pace. And they must do this while working within legacy frameworks and attempting to foster innovation.”

The report highlighted a variety of approaches which should guide future regulation efforts, including a greater focus on results and performance; fostering a more responsive and repetitive approach; engaging with a broad range of stakeholders across the societal ecosystem; and making use of real-time data to stay ahead of developments.

Deloitte Insights suggests making use of ‘regulatory sandboxes’ and accelerators to prototype and test new legislation in an effort to determine its effect on nascent technologies.

Deloitte’s Leishen Pillay explains: “Research has shown that the use of sandboxes enables governments to co-create the regulatory environment in a partnership type arrangement with the disruptors. This collaborative approach serves to educate the regulators on technological change and to educate the disruptors on the need for regulation.”

This approach gives regulators the closest thing they can expect to a crystal ball, and insights into how legislation might impact the market. “Certainly, research shows that regulators are far quicker to respond and adapt to innovation and change, which can have a positive effect on the economy and the general standard of living,” says Pillay.

This approach has already been successfully trialled in Canada, where the Canadian Securities Administrators (CSA) launched a regulatory sandbox in 2017 which relaxed certain regulatory requirements on start-ups in an attempt to unshackle these innovative companies from the red tape that might hinder their rapid growth. In 2017, Impak Finance entered the CSA Regulatory Sandbox, which gave the firm relief from certain securities regulation requirements. Impak, a platform for investing in socially-responsible businesses, went on to raise more than US$1 million through an equity crowdfunding campaign the same year.

Regulation, Libra and the crypto conundrum 

In July this year, Facebook’s intention to launch its Libra digital currency came under attack during a Senate Banking Committee hearing in the United States. The social media platform, courtesy of scandals like Cambridge Analytica’s data harvesting manipulation, had shown “that it doesn’t deserve our trust”, said Democratic senator, Sherrod Brown, at the time.

“Now Facebook may not intend to be dangerous, but surely they don’t respect the power of the technologies they’re playing with,” said Brown. “Like a toddler who has gotten his hands on a book of matches, Facebook has burned down the house over and over and called every arson a learning experience.”

There is good reason for concern on the part of lawmakers. Not only would Libra be highly disruptive to the traditional banking sector, it would potentially mark the beginning of bringing cryptocurrencies into the mainstream. As Nigel Green, CE of the financial advisory deVere Group, argues: “Tech giants entering the cryptocurrency sector indicates that digital money, as a concept, is fully mainstream and inevitably the way the world is going. This is something we have been arguing for a long time now, despite protestations from financial traditionalists… Where Facebook leads, others will inevitably follow, and this will quicken the pace of mass adoption of cryptocurrencies.”

Not only would it “revolutionise how people access, manage and use money across the world”, says Green, it is also forcing central banks and governments to take notice of digital currencies and how a cryptocurrency of this scale and reach would forever change the rules of the financial game.

Facebook has, meanwhile, been at pains to stress that it will abide by the United States’ financial regulations and will not collect data from Libra transactions without user permission.

The senate hearings of which Brown is a part offer some insight into the United States’ likely regulatory stance on this latest cryptocurrency offering. Far from the Bank of England’s more accepting tone, the senate appears distrustful and sceptical. This compares to the likes of India – an emerging market which would be an ideal target for Libra’s unbanked user focus – which appears likely to ban cryptocurrencies, in step with China’s approach. At a government panel in August 2019, headed by finance secretary Subhash Chandra Garg, a draft bill was shared calling for a complete ban on private cryptocurrencies in India. Some have called this a regressive move.

In South Africa, the South African Reserve Bank (SARB) is also keeping a close eye on Libra developments. Speaking to Acumen, a SARB spokeswoman explained, “Given the rapid pace of fintech developments, specifically around crypto assets, the SARB, together with fellow co-regulators, have been monitoring these developments closely. A joint policy paper by South African authorities on crypto assets is in progress and will address the risks arising from such assets.”

She added: “The developments on Libra, as with other stable coins, have been noted. Given that these systems are still in their conceptual phase and much further detail needs to be considered, it would be premature to comment on the impact of such developments at this stage.”


· Law-making takes time, but with rapidly emerging technologies driving change at an exponential rate, regulators need to streamline laborious processes.

· Countries like Japan, Israel, the United Kingdom, Canada and South Korea are finding ways to ensure the right balance between protecting their citizens, businesses and the economy without stifling business and innovation.

· Making use of ‘regulatory sandboxes’ and accelerators to prototype and test new legislation is one way to keep in step with nascent technologies, as are think tanks and policy forums.

· Particularly in the emerging world, it is essential that lawmakers evaluate the social impact of new technologies and evaluate these against the new opportunities they deliver.


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