Restraint of Trade in Kenya vs South Africa: What Employers and Employees Need to Know

Introduction

Restraint of trade clauses in employment contracts represents one of the most enduring tensions in labour law. On one side stands the employer’s legitimate interest in protecting business assets, including trade secrets, customer connections, and goodwill. On the other stands the employee’s fundamental right to pursue economic activity and earn a livelihood. This tension has generated extensive jurisprudence in both Kenya and South Africa, with each jurisdiction developing distinct approaches while grappling with similar substantive issues.

A comparative study of these two legal systems is illuminating because they share a common law heritage but have diverged in their legislative and judicial responses to the restraint of trade problem.

Kenya has codified the law through the Contracts in Restraint of Trade Act (Cap 24), enacted in 1932, while South Africa has developed an extensive body of case law grounded in common law principles, with the Constitution of the Republic of South Africa, 1996 providing additional normative guidance. Examining both jurisdictions reveals the strengths and weaknesses of each approach and offers important lessons for practitioners operating in either jurisdiction.

The Historical Foundations

Kenya: The Statutory Framework

The Contracts in Restraint of Trade Act (Cap 24) was enacted in 1932, during the colonial period, and remains the primary legislative authority on the subject. Section 2 of the Act provides that any agreement containing a provision restraining a party from exercising any lawful profession, trade, business or occupation shall not be void merely because the provision is contained in the agreement.

However, the High Court has power to declare such a provision void where it is satisfied that, having regard to the nature of the profession, trade, business or occupation concerned, the period of time and area within which it is expressed to apply, and all the circumstances of the case, the provision is not reasonable either in the interests of the parties or in the interests of the public.

Section 3 of the Act adds an important qualification, that any such provision or covenant shall be void where an employer terminates the services of an employee in contravention of the terms of the contract of service. This provision, which has no direct equivalent in South African law, protects employees whose employment has been unfairly terminated from being bound by a restraint covenant. In Richard Kioko Kakuli v Sai Raj Limited [2020] KEELRC 1214 (KLR), the court noted that section 3 operates to void a restraint where an employee’s dismissal was contrary to the terms of service, though it was not the determinative issue on the facts of that case.

South Africa: The Common Law Evolution

South African law on restraint of trade was dramatically reshaped by the Appellate Division in Magna Alloys and Research (SA) (Pty) Ltd v Ellis 1984 (4) SA 874 (A). Prior to this decision, South African courts had largely followed the English approach, which treated agreements in restraint of trade as prima facie void and unenforceable unless the party seeking to enforce them could prove they were reasonable. The Magna Alloys decision rejected this approach, holding that restraint agreements are prima facie valid and enforceable. The onus rests on the party seeking to avoid the restraint to prove, on a balance of probabilities, that enforcement would be unreasonable and contrary to public policy.

The court in Magna Alloys reasoned that this approach was more consistent with Roman-Dutch law principles, which did not view agreements in restraint of trade with the suspicion characteristic of English law. The court emphasised that the public interest in upholding contractual obligations (pacta sunt servanda) should be the starting point, with freedom of trade operating as an exception where the restraint is shown to be unreasonable.

The Test for Enforceability: A Comparative Analysis

The Kenyan Test

In Kenya, the test for enforceability is derived from section 2 of the Contracts in Restraint of Trade Act. The court must consider four factors:

1. The nature of the profession, trade, business or occupation concerned
2. The period of time for which the restraint applies
3. The area within which the restraint applies
4. All the circumstances of the case

If, having regard to these factors, the court is satisfied that the provision is not reasonable either in the interests of the parties or in the interests of the public, it may declare the provision void. The question of onus has been a matter of some debate, but the weight of authority suggests that the party seeking to enforce the restraint bears the burden of proving its reasonableness.

The South African Test

The South African test, articulated in Basson v Chilwan and Others 1993 (3) SA 742 (A), requires consideration of four questions:

1. Does the one party have an interest that deserves protection after termination of the agreement?

2. If so, is that interest threatened by the other party?

3. Does such interest weigh qualitatively and quantitatively against the interest of the other party not to be economically inactive and unproductive?

4. Is there an aspect of public policy having nothing to do with the relationship between the parties that requires that the restraint be maintained or rejected?

A fifth question, whether the restraint goes further than necessary to protect the interest, was added in Reddy v Siemens Telecommunications (Pty) Ltd 2007 (2) SA 486 (SCA).

The key difference between the two tests lies in the allocation of onus. In South Africa, following Magna Alloys, the employee bears the onus of proving that the restraint is unreasonable. In Kenya, the party seeking to enforce the restraint must prove its reasonableness, although some recent cases have suggested that courts may not need to resolve the onus question where the facts regarding reasonableness have been adequately explored.

Protectable Interests

Confidential Information and Trade Secrets

Both jurisdictions recognise that confidential information and trade secrets constitute protectable interests. The test for what constitutes confidential information was articulated in Advtech Resourcing (Pty) Ltd t/a Communicate Personnel Group v Kuhn and Another 2008 (2) SA 375 (C) and adopted in Kenya in cases such as LG ELECTRONICS AFRICA LOGISTICS FZE V CHARLES KIMARI [2012] KEHC 5548 (KLR) Information must meet three requirements:

1. It must be capable of application in trade or industry (useful)

2. It must not be public knowledge or property

3. It must be of economic value to the person seeking to protect it

In Richard Kioko Kakuli v Sai Raj Limited, the court noted that the claimant had admitted during cross-examination that he had received special training from the respondent in deco roof and that this process was not done by any other person or entity, making it special to the respondent. This evidence supported the existence of a protectable interest.

The distinction between confidential information and an employee’s general skill and knowledge is critical. In Automotive Tooling Systems (Pty) Ltd v Wilkens 2007 (2) SA 271 (SCA), the court held that skills acquired by an employee in the course of developing their trade do not constitute a protectable interest of the employer. As the court stated in Aranda Textile Mills (Pty) Ltd v Hurn and Another [2000] 4 All SA 183 (E), “A man’s skills and abilities are a part of himself and he cannot ordinarily be precluded from making use of them by a contract in restraint of trade.”

Trade Connections and Goodwill

The protection of trade connections is the second category of protectable interest. In Rawlins and Another v Caravantruck (Pty) Ltd 1993 (1) SA 537 (A), the court held that an employer’s need to protect trade connections arises where the employee has access to customers and is in a position to build up a particular relationship with them so that when they leave, they could easily induce customers to follow them to a new business.

A significant development in Kenya occurred when the Supreme Court in Jovet (Kenya) Limited v Bavaria NV [2025] KESC 27 (KLR) recognised goodwill as a property right protected under Article 40 of the Constitution of Kenya, 2010. The court held that goodwill qualifies as property and is protected from arbitrary deprivation, provided it is identifiable and has measurable value. This recognition has implications for restraint of trade cases, as it strengthens the legal basis for protecting trade connections.

Unreasonable Restraints

Restraints That Stifle Competition

Courts in both jurisdictions have been consistent in holding that a restraint which merely seeks to stifle competition, without protecting a legitimate interest, is unreasonable and unenforceable. In Esquire System Technology (Pty) Ltd t/a Esquire Technologies v Cronjé and Another (2011) 32 ILJ 601 (LC), the court struck down a restraint imposed on a junior employee, noting that it would “serve merely to stifle competition and not to protect any real interests worthy of protection.”

Similarly, in Bridge International Academies Limited v Robert Kimani Kiarie 2015KEHC3377(KLR), the High Court of Kenya declined to enforce a non-compete clause, observing that “contracts in restraint of trade are generally invalid” and that partial restraint may be valid only if reasonable in the interest of both parties. The court found that the plaintiff had failed to substantiate its allegations that the defendant had established and was operating a school in competition.

The Scope of the Restraint

Restraints that are too broad in their geographical scope or duration are frequently struck down as unreasonable. In Zero Model Management (Pty) Ltd v Barnard, the court reduced the territory of a restraint to the Cape Town Metropolitan area because the applicant’s business was concentrated there. In Vodacom (Pty) Ltd v Motsa 2016 3 SA 116 (LC), the court considered whether a restraint of trade should be limited to countries where the employer required protection.

The South African Appellate Division in Basson v Chilwan and Others 1993 (3) SA 742 (A) was divided on whether a restraint that applied to the whole of Southern Africa was unreasonable. The case involved a restraint clause that applied to the Republic of South Africa, Namibia, Ciskei, Venda, Transkei, Lesotho, Swaziland, and Zimbabwe. Basson was not a mere employee but a member of a close corporation with equal rights to participate in the management of the business. The Chilwans had invested more than R1 million in setting up Coach-Tech, and they relied heavily on Basson’s skill and experience in the bus construction industry.

The majority, per Eksteen JA, held that the restraint was enforceable despite its geographical breadth. The majority reasoned that the parties had contracted on a basis of equality. Basson was free to use his skills in other spheres of the construction industry and was not being relegated to a life of idleness. Van Heerden JA, in a concurring judgment, drew an analogy with a partnership where the parties agree that upon dissolution, a partner will not compete with the continuing partners. The court held that the interests of Coach-Tech and the Chilwans outweighed Basson’s interest in being free to compete, particularly given that the restraint was limited to the territory where Coach-Tech conducted its business.

The Dissenting Opinions

The dissenting judgments, per Nienaber JA and Botha JA, expressed grave concern about the scope of the restraint. Botha JA, who agreed with Nienaber JA’s reasoning, noted that “the restraint applies to the whole of Southern Africa” and observed that he was “not aware that a restraint so oppressive in scope has ever been countenanced in our courts.” The dissent reasoned that the Chilwans were seeking to prevent Basson from using his skill and experience anywhere in Southern Africa, which was disproportionate to their legitimate interests.

Nienaber JA (dissenting) took issue with the majority’s characterisation of Basson as contracting on a basis of equality. He argued that the restraint clause, which prevented Basson from being employed by any competitor for five years over an area covering most of Southern Africa, was unreasonable in its scope. The dissent emphasised that Basson’s skill and experience in the bus construction industry was an asset that belonged to him, not to Coach-Tech, and that the Chilwans could not appropriate that asset through a restraint clause. The dissent also questioned the majority’s reliance on the fact that Basson could find employment outside the bus construction industry, noting that this was an inappropriate consideration given that Basson had devoted substantially the most of his working life to that trade.

The Development of the Law in Subsequent Cases

The dissenting view in Basson v Chilwan appears to have gained traction in later cases, which have increasingly emphasised the need for proportionality in restraint clauses. The courts have become more willing to reduce the scope of restraints, both geographically and temporally, where they exceed what is reasonably necessary to protect the employer’s interests.

In Labournet (Pty) Ltd v Jankielsohn and Another (2017) 38 ILJ 1302 (LAC), the Labour Appeal Court struck down a three-year restraint imposed on a junior employee. The court emphasised that the reasonableness of a restraint must be assessed with reference to the circumstances at the time enforcement is sought, and that a restraint which goes further than necessary to protect the employer’s interests is unreasonable. The court noted that Jankielsohn occupied the “lowest possible” position in the scheme of Labournet’s business and that he had no access to confidential information that would justify a three-year restraint.

The Labour Court in Medtronic (Africa) (Pty) Ltd v Van Wyk and Another (2016) 37 ILJ 1165 (LC) provided useful guidance on the factors relevant to assessing the reasonableness of a restraint’s scope. The court noted that the following considerations are relevant:

1. The nature and extent of the restraint

2. The duration of the restraint

3. The area of operation of the restraint

4. The nature of the activity sought to be prevented

5. The bargaining position of the parties

6. The protectable interest being asserted

In Kenya, the Contracts in Restraint of Trade Act (Cap 24) requires courts to consider both the period of time and the area within which a restraint is expressed to apply when determining its reasonableness. The High Court in LG Electronics Africa Logistics FZE V Charles Kimari [2012] KEHC 5548 (KLR) held that a restraint clause must be reasonable in the interests of both parties and the public, and that enforcing a restraint that would keep an employee out of employment for a significant period would be unreasonable in a country with high unemployment.

The recognition of goodwill as property in Jovet (Kenya) Limited v Bavaria NV [2025] KESC 27 (KLR) has significant implications for the scope of restraints in Kenya. If goodwill is property protected under Article 40 of the Constitution of Kenya, 2010, this strengthens the basis for protecting trade connections through restraint clauses. However, it also requires that any deprivation of this property be justified under the Constitution’s limitation clause, which may require a more searching scrutiny of the scope of restraints.

Both jurisdictions recognise that the scope of a restraint must be assessed against the broader public interest. In Credit Reference Bureau Holdings Limited v Steven Kunyiha [2017] KEELRC 1418 (KLR), the Kenyan Employment and Labour Relations Court declined to enforce a restraint, observing that in a country “where unemployment is soaring every single day, subjecting the defendant to loss of employment on the basis of a restrictive clause would be unreasonable and not in the interest of either party. Indeed such an action would be contrary to public policy.”

Similarly, in Bridge International Academies Limited v Robert Kimani Kiarie [2015] KEHC 3377 (KLR), the High Court of Kenya refused to grant an injunction because the plaintiff had failed to demonstrate that the defendant had breached the non-compete clauses in the employment contract. The court noted that “contracts in restraint of trade are generally invalid” and that partial restraint may be valid only if reasonable in the interest of both parties.

The scope of a restraint of trade is a critical factor in determining its reasonableness and enforceability. The decision in Basson v Chilwan remains a landmark authority, though the dissenting view, which questioned whether a restraint applying to the whole of Southern Africa could ever be reasonable, has influenced subsequent decisions. The courts have increasingly emphasised the need for proportionality, and they are willing to reduce the scope of restraints where they exceed what is reasonably necessary to protect the employer’s interests.

Restraints and Garden Leave

The relationship between garden leave clauses and post-termination restraints has generated a lot of discussion in South Africa. In Vodacom (Pty) Ltd v Motsa, the court grappled with the question of whether enforcement of a garden leave provision impacts on enforcement of a post-termination restraint. The court held that a restraint of trade will be enforced only if the employer’s proprietary interest requires additional protection beyond what is achieved under the garden leave clause.

The decision in Air New Zealand v Kerr was cited with approval for the proposition that an employer will not be entitled to additional protection where garden leave has provided all the benefits of a post-termination restraint. If the period of garden leave and the period of the restraint, taken together, result in the employee being commercially inactive for longer than is reasonably necessary, the restraint will be held unreasonable.

The Public Interest Dimension

Both jurisdictions recognise that public interest is a critical factor in determining whether a restraint should be enforced. In Kenya, section 2 of the Contracts in Restraint of Trade Act explicitly requires consideration of whether the restraint is “injurious to the public interest.”

In South Africa, the Constitution of the Republic of South Africa, 1996 has informed the public policy analysis, with courts required to consider whether enforcement of a restraint would be “reasonable and justifiable in an open and democratic society.”

In Credit Reference Bureau Holdings Limited v Steven Kunyiha [2017] KEELRC 1418 (KLR), the court declined to enforce a restraint, observing that in a country “where unemployment is soaring every single day, subjecting the defendant to loss of employment on the basis of a restrictive clause would be unreasonable and not in the interest of either party. Indeed, such an action would be contrary to public policy.” This reasoning reflects the heightened judicial sensitivity to the socio-economic context in Kenya.

The Burden and Standard of Proof

Kenya: The Emerging Approach

In Kenya, the general position is that the party seeking to enforce a restraint bears the burden of proving its reasonableness. The Contracts in Restraint of Trade Act places the onus on the party seeking to uphold the restraint to satisfy the court that the covenant is reasonable in the interests of the parties and not injurious to the public interest.

However, some courts have adopted a more nuanced approach. In Richard Kioko Kakuli v Sai Raj Limited, the respondent relied on the principle in Levison v Patent Steam Carpet Cleaning Co Ltd [1977] 3 All ER 498 that “a party of appropriate age and understanding is normally bound by his signature to a document, whether he reads it or not.” The court noted this principle but did not apply it mechanically, suggesting that the statutory requirement to assess reasonableness remains paramount.

The Court of Appeal of Kenya has not definitively resolved the question of onus, and practitioners should be prepared for arguments on both sides. The safest approach is to treat the burden as resting on the party seeking to enforce the restraint, consistent with the language of section 2 of the Act.

South Africa: The Magna Alloys Approach

In South Africa, following Magna Alloys, the onus rests on the party seeking to avoid enforcement to prove that the restraint is unreasonable. The reasoning is that agreements freely entered into should be enforced unless they are contrary to public policy. The court in Reddy endorsed a pragmatic approach that avoids embroilment in the issue of onus where the facts regarding reasonableness have been adequately explored.

The dissenting judgment in Basson v Chilwan argued that where parties contract on a basis of equality, the principle of pacta sunt servanda should find strong application. However, the majority in Reddy suggested that the Constitutional Court might require a shift in onus, given that the right to choose a trade, occupation or profession freely is protected under section 22 of the Constitution. This question remains unresolved, though subsequent cases have largely followed the Magna Alloys approach.

Recent Developments

Kenya: The Constitutional Dimension

The recognition of goodwill as property in Jovet (Kenya) Limited v Bavaria NV [2025] KESC 27 (KLR) has great implications for restraint of trade cases. If goodwill is property protected under Article 40 of the Constitution, this strengthens the basis for protecting trade connections through restraint clauses. However, it also requires that any deprivation of this property be justified under the Constitution’s limitation clause.

The case of LG Electronics Africa Logistics FZE v Charles Kimani established that a restraint clause must be reasonable in the interests of both parties and the public. The court noted that enforcing a restraint that would keep an employee out of employment for a significant period would be unreasonable in a country with high unemployment.

South Africa: Recent Judicial Guidance

The Labour Court in Hudaco Trading (Pty) Ltd v Sniperverse (Pty) Ltd and Others [2024] ZALCJHB 112 reaffirmed the enforceability of restraint of trade clauses where the breach involves confidential or proprietary information. Judge Daniels emphasised the tension between an individual’s right to be economically active and the need to respect agreements entered into. Importantly, the court noted that “our courts are more likely to take a favourable view of the restraint agreement where the parties engaged on an equal footing” while acknowledging that “in an employment context, parties rarely contract as equals.”

The court also held that the evasive conduct of the party alleged to have breached the restraint supported the credibility of the applicant’s case. This serves as a reminder that the manner in which parties respond to allegations can significantly influence the court’s assessment.

Practical Guidance for Practitioners

For Employers Seeking to Enforce a Restraint

1. Draft with precision. Ensure the restraint clause is clear and limited to the employer’s legitimate proprietary interests. Avoid boilerplate clauses that are not tailored to the specific role.
2. Identify the protectable interest. Be prepared to articulate the specific confidential information or trade connections the restraint protects. General assertions are unlikely to satisfy the court.
3. Justify the scope. The duration, geographical area, and activities covered must be rationally connected to the protectable interest. Overly broad restraints are vulnerable to being struck down.
4. Consider garden leave. If seeking to rely on both garden leave and a post-termination restraint, consider whether the garden leave period alone provides sufficient protection.
5. In Kenya, be prepared to prove reasonableness. The burden of establishing reasonableness rests on the party seeking to enforce the restraint, and the court will scrutinise the clause carefully.

For Employees Resisting Enforcement

1. Attack the protectable interest. Argue that the information is not confidential, or that the employee did not have access to trade secrets or meaningful customer connections.
2. Emphasise oppression. Highlight the employee’s seniority status, the disproportionate nature of the restraint compared to their salary, and the impact on their ability to earn a living.
3. Argue public interest. In Kenya, invoke the high rate of unemployment and the constitutional right to work. In South Africa, rely on section 22 of the Constitution.
4. Challenge the scope. If the restraint is too broad in its geographical or temporal application, argue that it goes further than necessary to protect the employer’s interests.
5. In Kenya, assert the burden of proof. The party seeking to enforce the restraint bears the burden of proving its reasonableness under section 2 of the Act.

Conclusion

The law of restraint of trade in Kenya and South Africa reflects a shared heritage and common challenges, but with distinct approaches to the central questions of onus, scope, and enforceability. The statutory framework in Kenya, enacted in 1932, provides a structured test for assessing reasonableness, while South Africa’s common law framework, as developed in cases such as Magna Alloys, places the initial burden on the employee to show unreasonableness.

Both jurisdictions recognise that a restraint of trade must protect a legitimate interest and must be reasonable in its scope. The courts have consistently struck down restraints that are too broad, that stifle competition without justification, or that impose an oppressive burden on employees. The public interest, including the right to work and earn a livelihood, is a factor that must be considered in both jurisdictions.

The recognition of goodwill as property in Kenya and the ongoing constitutional dialogue in South Africa suggest that the law of restraint of trade will continue to evolve. Practitioners must remain alert to developments in both jurisdictions and be prepared to argue cases based on the specific statutory and constitutional framework applicable to their situation.

Authored by Benson Odiwuor Advocate, High Court of Kenya

This article is a publication of the Litigation Practice Notes series, featured in The BOLD Newsletter. For questions, clarifications, or suggestions on this or related subjects, contact the author directly: insights@bensonodiwuor.com / info@benodiwuor.com.