For the ANC, the key metric of how well the party is doing and the progress it is making towards its nirvana of the National Democratic Revolution is whether company ownership and employment patterns match the racial and gender breakdown of the country’s population.
There is no sign that the ANC is in the mood to compromise on this. The party is a lot more about distribution than growing the economic pie, and it is prepared to trade off economic growth for distribution.
But the ANC might have over-reached with the passage of the Employment Equity Amendment Act, signed by President Cyril Ramaphosa last year. The Act is due to be implemented in January next year. There is likely to be a showdown soon afterwards, when the Minister of Employment and Labour, Nomakhosazana Meth, comes up with the racial employment quotas she wants companies to implement.
The Act, when in force, will allow the Minister of Employment and Labour to decree racial and gender targets for each economic sector. Companies with more than 50 employees are covered by this law and will have to come up with plans to meet the new government targets.
A failure to comply with the Act allows the state to impose ruinous fines, which could push some firms into bankruptcy.
And non-compliant firms are barred from doing business with the State.
Last week Sakeliga urged its more than 12,000 members to defy the new law, if they think this is in their best interests. “Businesses should prepare for maximum achievable non-cooperation with the irrational, harmful, and unconstitutional act for as long as it takes to have it scrapped or rendered practically impotent.”
“Sakeliga encourages business-people to remain firm and not make any changes to their employment policies for the sake of the Employment Equity Act.”
Sakeliga CEO Piet Le Roux said there was no need to immediately rush to comply with the Act, as the Minister has yet to state what employment targets will be implemented for each sector. When more is known about the ministerial requirements and racial quotas, Sakeliga will go to court to challenge the legislation.
Watershed
This must be a watershed. For the first time since 1994, a business body has stood up and urged defiance of legislation that is fundamentally against the interests of its members. In contrast with Sakeliga, big business in the country, which is close to the government and objects to little, has kept its silence about the Act. It tends to go along to get along and steer away from confrontation.
Another business association, the National Employers’ Association of South Africa (NEASA) which has 7000 small and medium-sized business members, shares Sakeliga’s views that the Act is unconstitutional, but says non-compliance is far too risky.
Sakeliga points out in its statement that, “the (Employment and Labour) department and state in general lacks the capability and resources to police employers at the scale required.”
Even if that is the case, NEASA’s Chief Executive Gerhard Papenfus says that defiance might expose employers to unnecessary prosecution. NEASA’s approach, “at least for the time being,” is to comply with the reporting requirements, “but to never deviate from the principle of appointing on merit.”
NEASA says at some stage the new regulation will be challenged on a constitutional basis as it infringes on the basic right of businesses to conduct their business in a manner that they deem fit.
When they report under the Act, NEASA says companies should give reasons why they cannot comply with the targets due to a host of reasons, including the rising financial pressures on payroll, skills shortages, and the heavy investment that would be required in training.
That might force the ANC to see the big trade-off: more affirmative action in the workplace in exchange for less investment and the heightened risk of firms going out of business. There is the wider economic cost that many companies might ensure that they do not take on more staff and remain below the threshold for compliance with the Act.
Loss of capacity
The damage from the ANC’s vision of employment equity has been amply demonstrated in the public sector. It has resulted in major loss of capacity as a result of “cadre deployment”, and today the state is increasingly dysfunctional. A ministerial insistence on hiring could easily drive companies into operational inefficiencies and bankruptcy. Frequent changes in racial quotas can only create further uncertainty and discourage investors.
There is the additional problem that the implementation of racial quotas would be illegal in the home countries of some foreign companies. That would be a real investment-killer.
The most benign outcome might be that the Department of Employment and Labour imposes racial quotas but accepts reasons why a company cannot implement these and takes a soft approach.
Last year the Department reached a deal with the trade union Solidarity on the implementation of the Act. Under a deal brokered by the International Labour Organisation, race cannot be used to determine who is hired, fired or promoted.
Race also cannot be used as the sole consideration in employment equity plans. How the department will balance this with its plans has yet to be seen. Significantly, the ILO has also said that affirmative action can only be used as a temporary measure.
The ANC is very unlikely to back down on what it sees as central to its empowerment cause. It sees advances on this front as key to it upholding its ideology and defending itself from criticism from its left and more populist flank: the Economic Freedom Fighters and uMkhonto weSizwe.
So a variety of groups will join Sakeliga and NEASA in resorting to lawfare through the courts. Anthea Jeffery, the Head of Policy Research at the Institute of Race Relations, who has written extensively about the legal aspects of employment equity and empowerment, says the Act is seriously flawed and inconsistent with various provisions of the Constitution, including the core value of “non-racialism.”
Prohibits unfair discrimination
She also points out that the equality clause in Section 9 of the Constitution, Section 9, prohibits unfair discrimination on racial grounds. And while a third clause calls for a public administration that is “broadly representative,” it makes it clear that this cannot trump other needs such as the effective use of resources.
This provides a good basis for Constitutional Court challenges, but as is the case generally with the law, it can take a very long time for things to happen. One positive aspect of the Employment Equity Amendment Act is that it has galvanised a very motivated opposition to racial quotas.
Perhaps merit can ultimately triumph over racial preferences.
Note: A number of the reports in the IRR’s Blueprint for Growth series were used in writing this column. This includes the report on Breaking the BEE Barrier to Growth by Dr Anthea Jeffery.
[Image: Peggy und Marco Lachmann-Anke from Pixabay]
The views of the writer are not necessarily the views of the Daily Friend or the IRR.
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