The Institute of Race Relations has warned that proposed changes to South Africa’s equality legislation ‘could precipitate a banking crisis and push many companies into retrenchments or even bankruptcy’.
The warning is contained in a new report, Equality of Outcomes and the Pepuda Amendment Bill, released yesterday. The report is a detailed examination of the proposed amendments to the Promotion of Equality and Prevention of Unfair Discrimination Act (Pepuda) of 2000.
Author of the report, IRR head of policy research Dr Anthea Jeffery, notes in a statement that the existing Act, which took effect in 2003, was introduced to give effect to the Constitution’s prohibition of unfair discrimination on race, gender, and other listed grounds. It also requires companies (and many other entities) to achieve ‘equality in terms of outcomes’.
Jeffery points out that the Act’s equality provisions ‘were never brought into force, because the National Treasury warned in a Regulatory Impact Assessment that the burden on both business and the state would be too great’.
Now, however – and despite the major blows the economy has already suffered from the lengthy Covid-19 lockdown and many damaging laws – the Department of Justice and Constitutional Development wants to expand the equality provisions and bring them into operation.
The IRR warns that this is an impossible goal which cannot be achieved in practice and goes far beyond what the Constitution authorises.
If the Pepuda amendments go through, companies will have to:
• ‘eliminate discrimination’ that is ‘related to’ race or any other prohibited ground, even if that discrimination is neither ‘intentional’ nor ‘unfair’;
• provide ‘equal…access to resources, opportunities, benefits and advantages’; and
• achieve ‘equality in terms of impact and outcomes’.
The Act lists race as a prohibited ground, along with 17 others. It also empowers equality courts to recognise poverty as an additional prohibited ground, which the Western Cape high court has already done – though this was in the context of policing, rather than business.
Jeffery warns: ‘The ramifications of having to eliminate all differentiation on the listed grounds – even if that differentiation is legitimate – are enormous. They will become greater still if poverty is added to the listed grounds in the business sphere as well.
‘Banks making home loans, for example, would then have to achieve ‘equality in terms of impact and outcomes’ as between the poor and the better off. This could result in mortgages being extended to people unable to afford them, as happened in the global financial crisis of 2007/08. It could also precipitate a banking crisis in which millions could lose their homes and savings.
‘The obligation to achieve equality of outcomes would apply in every sector and to every business, regardless of its size. However, businesses cannot survive if their earnings do not exceed their expenditure – so retrenchments and bankruptcies might soon loom large.
‘Instead of helping the 11.4 million people already unemployed to find jobs and income, the Bill is likely to worsen the unemployment crisis and push more people into poverty.’
Jeffery concludes: ‘Though South Africa’s economy has been badly damaged, it still has many strengths. But the Bill will sap much of its remaining resilience – and must be roundly rejected if the government persists in trying to enact it into law.’