Artificial Intelligence (AI) is gradually impacting how corporate boards make decisions in South Africa. Executives are using AI to assess financial information, predict market trends, and identify potential risks before making strategic decisions. However, there is a significant problem: South African corporate laws do not yet regulate the use of AI by boards.
Legal Challenges and Responsibilities
While many countries have enacted binding regulations for AI, such as the European Union and South Korea, South Africa is still lagging behind in this area. Recent reviews indicate that the current law in the country provides little guidance on the use of AI in boards. This legal gap leads to managerial and legal challenges.
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Research shows that boards can use AI in various ways to manage companies and make decisions. Assistive AI can perform administrative tasks while decision-making control remains with the executives. For example, AI can schedule meeting agendas and prepare reports. However, more advanced AI can analyze vast amounts of information and suggest the best options in decision-making.
Responsibilities Arising from AI Decisions
One important legal question is who is responsible if AI harms a third party? If the board approves an investment based on AI recommendations and that investment leads to financial losses, who is liable? Since AI is not a legal entity, it cannot be sued for damages.
Given these challenges, it is essential for executives to become familiar with artificial intelligence and have a sufficient understanding of how it works. This awareness will help them maintain proper oversight of AI performance and uphold their responsibilities. Similarly, to create legal certainty in AI-based investments, clear regulations must be established to prevent disputes and legal issues in the future.
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