Why Labour Risk Belongs in Every Real-Asset Risk Register

When a real-asset transaction involves an existing operation — a farm with workers, a plant with staff, a mine with an existing workforce — the risk register usually focuses on title, permits and valuation. Labour risk is too often an afterthought, treated as an HR detail rather than a transaction risk. That is a mistake I see often, and it is entirely avoidable.

South African labour law creates real, transferable exposure in a transaction. Section 197 of the Labour Relations Act governs the transfer of contracts of employment when a business, or part of a business, changes hands as a going concern — and it does so automatically, regardless of what the sale agreement says about it. A buyer who assumes they are acquiring 'just the asset' can find themselves inheriting employment contracts, accrued leave liabilities, disciplinary history and even pending disputes they never priced into the deal.

Beyond the transfer question, a target's existing labour position tells you a great deal about how the underlying business is actually run. Are there unresolved CCMA referrals? Has the entity complied with sectoral determinations or bargaining council agreements where applicable? Is there a recognised union, and what is the state of that relationship? None of this shows up in a financial model, and all of it can materially affect both the cost of operating the asset post-transaction and the time it takes to stabilise it.

For projects involving community or cooperative labour structures — increasingly common in agri-energy and impact-oriented real-asset deals — the legal questions multiply. Who is actually the employer of record? Are beneficiary or cooperative members employees, members, or something else entirely, and does the documentation reflect that consistently? Ambiguity here isn't a technicality; it determines who is liable for what, and to whom.

Treating labour risk as a genuine due diligence category — not a side issue for HR to deal with after the deal closes — protects both the seller's credibility and the buyer's capital. It belongs in the same risk register as title and permitting, assessed with the same rigour, before any transaction is presented to serious capital.