One the key messages from the pandemic and the lockdown was that for all the talk of how it would change the very nature of society, it has had as good as no effect on economic policy. While GDP plummets, office space is being abandoned, firms have been pushed to the brink, and millions of jobs have been lost, there remains an eerie continuity in the underlying dynamics of South Africa’s economy.
Think of this as the monster swimming beneath the placid surface.
One of the prime elements of this is the country’s labour legislation. This has long been a much chewed-on bone of contention for a country wrestling with unemployment and declining absorption. Are weighty prescriptions on the hiring of people consonant with encouraging employment-creation, which is (supposedly) the great goal of South Africa’s economic thinking?
Recently, this matter has come to the fore again, in the form of the Employment Equity Amendment Bill. Published in July, but receiving heightened attention of late, this empowers the minister of employment and labour to identify sectors of the economy upon which to impose ‘numerical targets’. These are to be enforced under the threat of stiff fines.
When he announced the intention to tighten the legislation around Employment Equity last year, Minister of Employment and Labour Thulas Nxesi said: ‘We are going to be very hard on employers.’
The proposed legislation confirms this unambiguously: South Africa is being moved aggressively towards quotas. It also indicates clearly that in pursuit of a doubtful policy vision (a fundamentally ideological one) the government is willing to see enterprises destroyed. This is an extraordinary position to take.
Indeed, it is not extraordinary because preferential employment regimes across the world have a mixed record, at the most generous interpretation. Nor is it that South Africa’s policy is built on an assumption that demographic representivity is a natural condition when discrimination is removed – a position for which no real evidence exists.
Real damage
Rather, it is because it stands to do real damage to the prospects of the economy to generate the employment that the country so desperately needs. Understand (which many people of influence and authority apparently do not) that ‘the economy’ in this context is shorthand for firms and entrepreneurs. Employment is seldom an end in itself, but rather something that is offered when help is needed to take advantage of an opportunity to do something valuable. For the private sector, this means turning a profit. (Once again, contrary to the assumptions of their critics, this is entirely honourable).
What this legislation ensures is that taking on employees will be subject to a heightened level of scrutiny. This will be measured against a ministerial determination, imposed on a given sector. (Sectors, like the economy, are composed of actual firms.) Firms whose plans do not conform to the quotas required of them will be held to account. In so doing, the government intends to intrude into key operational decisions.
Understand too that this is to be overseen by political authorities that have shown little enough sympathy with business – but are profoundly invested in the ideology around which this legislation revolves – and managed by officials who typically have little or no experience of the private sector.
The predictable consequence will be that providing employment will be a more difficult and risky prospect than it is now. The logical response is for firms to shield themselves from the labour market as much as possible. Of course, there are limits to what firms can do, but don’t underestimate their probable reluctance to expand a firm’s workforce where this can invite the unwelcome attention of a labour inspector. And reprimands about having hired the wrong race-and-gender component.
Avenue for exemption
The Bill does not afford firms an avenue for exemption, although an employer may offer a ‘reasonable ground for non-compliance’. What this will mean is unclear.
Interestingly, the Bill does make a significant concession in exempting firms employing fewer than 50 people. This will be welcomed – rightly, at least at first glance – for freeing smaller firms of the considerable compliance burdens that managing demographics involves. But it also means that a significant disincentive to growth, and employment growth, has been erected.
The intention is to be very hard, remember. And this legislation seems to be geared at doing just that.
The plans have survived through the pandemic and through the lockdown and are now awaiting passage. If this is the monster swimming beneath the placid surface, it is a beast with sharp claws and a crushing bite. The current direction of policy is to feed it – but South Africa is likely to find that it will swallow its future employment prospects for a long time to come.
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