From CompliNEWS | Financial Services Intelligence Watch

The Cape Argus reports that AI is increasingly being used by boards to assess financial information, identify risks and support strategic decisions, but South African company law does not yet specifically regulate how directors should rely on AI. Professor Rehana Cassim of Unisa has highlighted several unresolved issues, including whether AI-assisted decision-making is compatible with directors’ fiduciary duties, whether the business judgment rule in section 76(4) of the Companies Act will protect directors where AI-supported decisions produce negative outcomes, and where responsibility lies when AI-generated advice causes harm.

Cassim argues that the gap is becoming more significant as AI moves into mainstream corporate decision-making. While AI can assist boards by processing large volumes of information and identifying patterns, its outputs may also reflect poor quality or biased data and may not always be readily explainable. This creates a governance challenge because directors are still required to exercise independent judgment and act in the best interests of the company. The key concern is that directors cannot simply accept an AI recommendation without understanding, testing and appropriately challenging it.

Read the Full Cape Argus report here

Compli-Serve Governance Comment

Boards should treat AI as a decision-support tool, not a substitute for directors’ judgment. Even before specific legislation is introduced, companies should establish clear governance around approved AI use, accountability, data quality, human oversight, validation and escalation. King V already points towards ethical, transparent, fair and secure AI use with clear human oversight. For boards, the practical test is whether significant AI-assisted decisions can still be explained, challenged and evidenced as decisions genuinely made by directors rather than merely accepted from an automated system.