Proposed amendments to the Promotion of Equality and Prevention of Unfair Discrimination Act (Pepuda) of 2000 (the Act) could pressurise a host of companies and other entities in many different sectors to change the terms on which they do business with black, female, disabled, poor (and many other) people to avoid heavy penalties for failing to ‘promote equality in terms of impact and outcomes’.
The obligations imposed by the Bill will be impossible for companies to fulfil. They will also be enormously costly and burdensome, if only because the ‘equality’ being demanded cannot be measured, let alone attained. Polarisation and division are also sure to increase as unrealistic expectations are cynically raised by the government, and then inevitably dashed as ideology bumps up against reality.
Obligation to promote equality
The existing Act, which took effect on 16th June 2003, already bars unfair discrimination on a host of prohibited grounds. It also contains a chapter on the obligation resting on all companies (and a host of other entities) to promote equality. Though this chapter has never been brought into operation, that is now set to change under a sweeping set of proposed amendments to the statute.
The Department of Justice and Constitutional Development (the Department) has invited public comment by 12th May 2021 on a draft Pepuda Amendment Bill (the Bill). This Bill will require companies, as part of their ‘general responsibility to promote equality’, to:
- ‘eliminate discrimination’ that is ‘related to’ 18 listed grounds – and an indefinite number of ‘comparable’ grounds – even if that discrimination is neither ‘intentional’ nor ‘unfair’ nor ‘the dominant reason’ for the conduct in question;
- provide ‘equal…access to resources, opportunities, benefits and advantages’; and/or
- achieve ‘equality in terms of impact and outcomes’.
No defence of ‘fair’ discrimination
The Department may possibly have made a drafting error in demanding the elimination of all discrimination – rather than that which is ‘unfair’ – as part of the general obligation to ‘promote equality’. This omission seems intentional, however, for it strips away the defence of ‘fair’ discrimination that applies under the first ‘leg’ of the Act, which aims at the ‘prevention of unfair discrimination’.
Where unfair discrimination is alleged under the Act – say because a bank charges higher interest rates to people who pose a higher risk of default and who happen to be black – the bank may be able to avoid liability by showing (among other things) that it has ‘differentiated reasonably and justifiably between persons according to objectively determinable criteria, intrinsic to the activity concerned’.
This ‘objective criteria’ defence applies solely to claims of unfair discrimination. It is thus irrelevant under the second ‘leg’ of the Act, which aims at the promotion of equality. Hence, a bank will not be able to rely on the defence of ‘objective criteria’ once the Bill takes effect and it is the bank’s failure to promote equality that is in issue.
To avoid liability under the equality rules, companies will be obliged, as earlier outlined, to ‘eliminate discrimination’, provide ‘equal access’ to resources and benefits, and/or achieve ‘equality in terms of impact and outcomes’. They will have to do so, moreover, on 18 ‘prohibited’ grounds as well as any other ‘comparable’ grounds that may in time be added.
Discrimination ‘related to’ the prohibited grounds
Under the Bill, the definition of ‘discrimination’ is being expanded to a significant extent. Under the revised wording, discrimination will mean any act, omission, practice, or situation which, ‘whether intentionally or not’, imposes burdens on, withholds benefits from, ‘causes prejudice to’, or ‘otherwise undermines the dignity’ of any person for a reason ‘related to’ the prohibited grounds. It is irrelevant whether that reason was ‘the sole or dominant’ reason for the act or omission in question.
The Act lists 18 prohibited grounds, these being race, gender, sex, pregnancy, marital status, ethnic or social origin, colour, sexual orientation, age, disability, religion, conscience, belief, culture, language, birth, and HIV/AIDS status.
Also potentially included in the prohibited grounds are any other grounds which ‘perpetuate systemic disadvantage’, undermine human dignity, or adversely affect rights and freedoms in a serious manner ‘comparable to’ discrimination on a ground already listed. A potential new prohibited ground need satisfy only one of these criteria.
The Act identifies ‘socio-economic status’ as a possible additional ground – and defines it as ‘a social or economic condition’ of a person ‘disadvantaged by poverty, low employment status or low-level educational qualifications’. The Act also empowers an equality court to decide, in any future case, that socio-economic status should indeed be recognised as a prohibited ground.
If such a decision is made and the Bill is also enacted and brought into effect, companies will have to ‘eliminate discrimination’, ensure ‘equal access’ to resources and opportunities, and/or achieve ‘equality of outcomes’ as between the better off and those ‘disadvantaged by poverty’, unemployment, or poor schooling. The ramifications of such a shift will be far-reaching.
Penalties for failing to promote equality
Companies that fail to ‘eliminate discrimination’, ensure ‘equal access’, and/or achieve ‘equality of outcomes’ may be penalised under the legislation or codes that various ministers will be obliged to introduce to help promote equality. There is no certainty as yet as to what such penalties could comprise.
On the current wording of the Bill, companies that fail to promote equality in any of these three ways will not necessarily be liable for damages for any resulting financial or other losses. (Under the Act, these penalties apply solely in cases of ‘unfair’ discrimination, hate speech, or harassment and the Bill leaves this wording unchanged.)
However, the expanded definition of discrimination in the Bill may make it more difficult for companies to prove that any discrimination in which they may unintentionally have engaged is not unfair. The ‘objective criteria’ defence will still be available, but companies may nevertheless find it harder to show the fairness of their conduct when the definition of discrimination is so much wider than before.
If they fail to discharge this onus, then the Act’s many penalties for unfair discrimination may be applied – and will come on top of any punishments imposed under other rules for failing to promote equality.
Ramifications of the Bill for banks
The provisions of the Bill are so broad that its ramifications are difficult to assess. Some insights may, however, be gained from considering the likely impact of the Bill on the banking sector, which currently confronts a #Racistbanksmustfall campaign.
The Act already identifies ‘red-lining on the grounds of race and social status’ as an unfair or potentially unfair practice. It applies the same critique to any ‘unfair discrimination in the provision of housing bonds, loans, or financial assistance’.
At present, however, banks can largely defend themselves against unfair discrimination claims by showing that their lending practices ‘differentiate reasonably and justifiably between persons according to objectively determinable criteria, intrinsic to the activity concerned’.
When the Bill takes effect, banks will be expected to ‘eliminate discrimination’, irrespective of whether this is fair or unfair, and the ‘objective criteria’ defence will be irrelevant in assessing whether they have failed to promote equality.
The Bill is thus likely to put significant pressure on the country’s major banks to change long-established methods of risk evaluation – and to engage in lending practices that may not be sustainable and could contribute to a banking crisis.
With the Bill currently open for public comment, it is probably not coincidental that a #Racistbanksmustfall campaign was recently launched by the EFF, Cosas, Sanco, the MKMVA, Transform RSA, and various others.
The campaign alleges, in the words of Transform RSA president Adil Nchabeleng, that ‘banks are quick to repossess’ cars or houses belong to black people, that they ‘target black people by closing their bank accounts’, and that they charge blacks higher interest rates. Mr Nchabeleng also echoes recent criticisms by President Cyril Ramaphosa in accusing banks of having been ‘racially selective in providing the R200bn in Covid-19 relief funds’.
Under the equality provisions in the Bill, the banks will be obliged to ‘eliminate discrimination’. Hence, if Mr Nchabeleng is correct that banks charge different interest rates to white and black clients – even if this differentiation is based on their risk profiles rather than their race – then those banks will have failed to ‘eliminate discrimination’ and hence to promote equality.
In addition, if Mr Nchabeleng can cite prima facie evidence that the cars of people who happen to be black are more swiftly repossessed than those of people who happen to be white (perhaps because of differing crime levels in different residential areas), then the banks will have failed to provide ‘equal access’ to ‘resources’ and ‘advantages’. Nor will they have achieved ‘equality in terms of impact and outcomes’.
Moreover, if socio-economic status becomes recognised as a prohibited ground, banks will also have to ensure that the poor have ‘equal access’ to the ‘opportunities and benefits’ of home and other loans. Banks will also have to help the poor obtain equal outcomes with the rich in this regard.
The penalties to be applied
Failure to promote equality could expose the banks to penalties which remain as yet uncertain, as these will generally depend on the legislation or codes still to be introduced by relevant ministers.
However, if the banks are also accused of unfair discrimination – and fail to disprove this under the expanded definition of discrimination introduced by the Bill – then they will also face major penalties under the Act.
As part of these penalties, banks might be ordered by equality courts to pay damages for any resulting financial losses as well as for any ‘impairment of dignity’ and/or ‘psychological suffering’. They could also have their banking licences withdrawn or made subject to more onerous conditions.
Risks of a banking crisis
In practice, the amended Pepuda provisions, along with the additional equality rules that ministers will be obliged to introduce, could undermine established principles of risk assessment and require the granting of loans on equally easy terms to all individuals, companies, and other entities. Repossessions and foreclosures might also have to be implemented on a strictly equal basis and without regard to differing risk factors.
The banks might then want to safeguard their businesses by raising interest rates and imposing stricter repossession terms on everyone. However, such decisions could themselves attract penalties for denying black, female, disabled, and poor people equal access to ‘resources and opportunities’.
In a situation in which interest rates must perforce remain very low and loan repayments may become difficult to secure, banks could in time require guarantees and bailouts from the state to maintain confidence in the financial system and avoid a banking crisis. This could increase state ownership and control over the sector, making it easier for the government to direct the banks’ considerable resources to wherever the tripartite alliance considers appropriate.
What the NDR requires
This state control is precisely what the ANC and its dominant SACP ally want in order to push ahead with the socialist-orientated National Democratic Revolution (NDR) to which both have been committed for more than 60 years.
As the SACP puts it in The South African Road to Socialism, a particularly important NDR objective is to ‘mobilise…the immense resources…controlled by…private capital’ into ‘the transformational agenda’. However, this mobilisation, as the party acknowledges, ‘will not happen spontaneously and it will not happen willingly’.
Appropriate NDR interventions must therefore be implemented to achieve this objective. These range from ‘enforcing strategic discipline’ on cadres deployed to business to ensuring ‘effective state…regulation’, entering into ‘public-private participation arrangements’ and, if necessary, ‘straightforward compulsion and even expropriation’.
The Bill clearly fits within the category of ‘effective state…regulation’. Its underlying NDR objectives are being concealed, however, while the SACP/ANC alliance has been careful to play down the Bill’s enormous ramifications – not only for the banks but also for a host of other companies and entities, including civil society organisations.
Postponing the deadline for comment to 30th June 2021
Since the full consequences of the Bill cannot be unpacked in the limited time that has been allowed for public comment on the measure, concerned South Africans should urgently demand the postponement of this deadline.
An IRR request that the deadline for comment be postponed from 12th May to 30th June 2021 has been granted solely to the IRR itself, which is not what we requested. However, a general postponement has been denied – and this is the first thing that needs to change.
The views of the writer are not necessarily the views of the Daily Friend or the IRR
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