3 days ago
SA tech legal battles are exploding — our courts aren't built for this
Disputes over software failures, data breaches, and intellectual property rights are clogging courtrooms and arbitration panels. This litigation boom exposes a critical gap in South Africa's legal framework, argues Roger Wakefield of Werkmans Attorneys.
South Africa's digital transformation is rewriting the rules of its economy, propelling the nation into a tech-driven future.
With the IT market forecast to hit $24.5 billion by 2026, growing at a brisk 7.2% annually (Statista, 2024), industries from fintech to healthcare are reaping the rewards of innovation.
Yet, this technological surge is spawning a less celebrated byproduct: a dramatic rise in IT-related litigation.
As businesses lean on complex IT systems, disputes over software failures, data breaches, and intellectual property (IP) rights are clogging courtrooms and arbitration panels. This litigation boom exposes a critical gap in South Africa's legal framework, demanding a bold rethink of how the nation handles technology disputes.
The stakes are colossal.
In 2023, a major South African retailer sued a global software provider for R500 million after a botched enterprise resource planning (ERP) system crippled its operations. Such cases, rooted in poorly drafted contracts or unmet service-level agreements (SLAs), are becoming alarmingly common.
Meanwhile, data breach lawsuits are skyrocketing, fueled by the Protection of Personal Information Act (POPIA) of 2014. The Information Regulator reported over 1 200 breach notifications in 2024 alone, with a high-profile bank facing a R1 billion class-action suit after a 2023 hack exposed 1.5 million customers' data.
IP disputes are also surging, as seen in a 2022 case where a fintech startup battled a R100 million claim over alleged code theft. These cases aren't just legal skirmishes—they're existential threats to businesses navigating a digital economy.
Why is IT litigation exploding?
The answer lies in the complexity of modern technology and the inadequacy of current legal tools to address it. Unlike traditional commercial disputes, IT cases hinge on intricate technical evidence—think source code, system logs, or network configurations. Lawyers must translate this 'geek-speak' into arguments that resonate with judges, many of whom lack specialised tech training.
South Africa's judicial system, while robust, isn't built for this.
With no dedicated IT or IP courts, cases often languish in backlogs, some dragging on for over three years. The absence of tailored rules for emerging tech like artificial intelligence (AI) or blockchain only widens the gap.
Contrast this with the construction industry, which has long benefitted from standardised contracts and dispute resolution mechanisms fine-tuned for its complexities. IT, despite sharing similar traits—long project timelines, technical intricacy, and high financial stakes—lacks such a framework.
Software development contracts, for instance, are often vague, leaving room for disputes over scope, deliverables, or timelines. A 2023 arbitration case handled by Werksmans Attorneys underscored this: a medical scheme administrator faced a multi-million-rand claim for allegedly mimicking software functionality. The arbitrator ruled that functionality, unlike source code, isn't legally protectable—a nuance that highlights the need for clearer contractual terms.
This isn't just a legal problem; it's a business one.
IT disputes can derail projects, sink startups, or erode consumer trust. The 2024 dispute between a South African broadcaster and a U.S. tech firm over software licensing royalties showed how quickly disagreements can escalate, with millions in revenue hanging in the balance. Companies can't afford to treat IT contracts as afterthoughts. A well-crafted agreement isn't just paperwork—it's a shield against costly litigation and a blueprint for collaboration. Yet, too many firms skimp on legal rigor, only to pay dearly later.
So, what's the fix?
First, South Africa needs a specialised framework for IT disputes, akin to the construction industry's model. Standardised contracts, designed with input from tech and legal experts, could clarify expectations around IP ownership, licensing, and deliverables.
Dispute resolution mechanisms, like fast-track arbitration tailored for tech cases, would prevent disputes from ballooning into existential threats. The popularity of alternative dispute resolution (ADR) is already growing—92% of global firms surveyed in 2024 favored international arbitration for tech disputes. South Africa should lean into this, incentivising mediation and arbitration to unclog courts.
Secondly, the judiciary must evolve.
Digitisation efforts like Court Online are a start, but they're not enough. Establishing specialised IT courts or training judges in tech fundamentals could bridge the knowledge gap. Other nations, like the UK with its Technology and Construction Court, offer a blueprint. Without such reforms, South Africa risks falling behind as a destination for tech investment.
Finally, businesses must get proactive.
Investing in robust contracts and compliance with laws like POPIA isn't optional—it's survival. Boards should demand tech-literate legal counsel, capable of spotting risks in software deals or cybersecurity protocols before they morph into lawsuits. The cost of prevention pales compared to the price of litigation, as the R1 billion bank case painfully illustrates.
South Africa stands at a crossroads.
Its IT sector is a powerhouse, driving growth and global relevance. But the litigation surge is a warning: without a legal system equipped for the digital age, this promise could falter.
The nation needs more than patchwork fixes—it needs a paradigm shift. By embracing standardised contracts, specialised dispute resolution, and a tech-savvy judiciary, South Africa can turn its IT litigation challenge into a competitive edge.
The alternative—sticking with an outdated legal playbook—risks stifling innovation and scaring off investors. As technology reshapes the nation, its legal system must keep pace, or the digital dream could become a litigious nightmare.
Roger Wakefield is a director for litigation and dispute resolution at Werkmans Attorneys.
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