If South Africans think that the recent wave of load-shedding was the worst thing that could possibly happen to the country, they have no idea of the damage that national government’s intended amendments to the Employment Equity Act will have.
Since 2019, President Cyril Ramaphosa has been saying that the country needs reforms that will cut red tape and ensure drastic improvements in the ease of doing business. However, promises of better business conditions have not materialised. Quite the opposite: Thulas Nxesi, Minister of Employment and Labour, wants to introduce the Employment Equity Amendment Bill (EEB) in September.
The EEB seeks to amend the Employment Equity Act 55 of 1998. It has been approved by Parliament and has been sent to the President for signing. If implemented, the EEB will hinder the country’s economic growth, increase already high disinvestment by business, and trigger a further loss of skills to emigration.
Two major changes
The EEB brings about two major changes. First, the Minister of Employment and Labour will be empowered to determine sectoral numerical targets across almost all of the private sector. Second, the racial pre-disqualification criteria that were recently struck down as unconstitutional for government tenders will be brought back.
According to the current law, small businesses that have fewer than 50 employees but also have an annual turnover that is equal to an amount specified in Schedule 4 of the Employment Equity Act, are deemed to be a “designated employer” and fall within the scope of application of affirmative action measures. However, the definition of small businesses has been changed so that turnover is ignored and all that matters is whether a business has fewer than 50 employees.
As a result, a tiny minority of businesses that have fewer than 50 employees but very high profits will be exempt from “designated employer” status under the EEB and might therefore be able to dodge the Minister’s race quotas. Additionally, it is also important to note that section 14 of the Act, which permits for voluntary compliance with Chapter 3, has been repealed.
In theory this exemption from race quotas should be commended. However, it is important for South Africans to note that the number of small, medium and micro enterprises (SMMEs) has not grown since the governing party took over the country. According to the National Integrated Small Enterprise Development (Nised) Masterplan published in May, SMMEs operating in the South African economy have not grown from the 800 000 estimated to have existed in 1995. Moreover, the Small Business Institute found, before the pandemic, that 85% of the formal workforce is employed in businesses with more than 50 employees, while most of the rest are micro enterprises (one or two staff) that already qualify for exemptions without the EEB. Therefore, the exemption of small businesses as designated employers will not make that much difference.
Vague
Of the major EEB changes, the first is that under section 15A of the law, the Minister of Employment and Labour may identify national economic sectors which are defined as “an industry or service or part of any industry”. This is vague enough to let the Minister be extremely specific about which businesses he targets. For any economic sector that has been identified, the Minster may set numerical targets to ensure equitable representation of suitably qualified people from designated groups “at all occupational levels” in the workplace.
I do not support this change, chiefly because it will hinder the country’s economic growth. It will lead to disinvestment by business and a loss of skills to emigration. South Africa’s economy was already in a weak position before the coronavirus pandemic. In fact, it has been significantly weak for the past decade. There have been many factors that have resulted in the country’s weak economy, and one of the main contributors is the never-ending load-shedding.
Minister Nxesi’s comment that the EEB is “more aggressive” BEE is another reason why the implementation of the Bill must not be supported. It is without a doubt that BEE is a failed policy and can be seen as one of the biggest contributors to Eskom’s failures. It is for this reason that South Africans should support the IRR’s recently launched “Fight Load-shedding, Stop BEE at Eskom” campaign, which demands that finance minister Enoch Godongwana grants exemptions from BEE in Eskom procurement to cut costs that are better spent fighting load-shedding.
Race quotas
If adopted, the EEB would allow Minister Nxesi to impose public sector race quotas – which have sometimes relied on the “Barnard Principle” (that it is better to leave a job vacant for years than to hire a white person) – on the private sector. This would significantly affect the country as it would contribute to the high brain drain. This is very concerning, considering that South Africa is suffering from many skill shortages. According to the Centre for Risk Analysis’s recent Macro Review, South Africa’s labour market largely supplies low- and semi-skilled individuals, who are not suitable for the economy’s requirements, which has a desperate need for highly skilled individuals.
The EEB would also force employers to “pencil test” their staff, meaning that if an employee says they are one race, then the employer can be fined, potentially millions of rands, if the employee turns out to belong to a different race, according to the Department of Labour. But how will anyone determine who belongs to what race without going right back to some of apartheid’s most humiliating absurdities?
For all these reasons, the IRR has strenuously pushed back against the EEB. The Institute’s EEB petition, which was handed over to the President last month, ran to more than 23 000 signatures. However, more needs to be done to ensure that President Ramaphosa does not implement the Bill. Minister Nxesi is determined to have the EEB implemented as soon as possible, and has even stated that it should be signed into law by September. South Africans surely cannot allow this to happen, as it will contribute to the further deterioration of the country’s economy.
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