Employment Equity Bill: taking an unnecessary big stick to business
- Anthea Jeffery
- 05 Nov 2013 08:39 (South Africa)
The current Employment Equity Act of 1998 requires all ‘designated’ employers (those with 50 or more employees or annual turnover above specified thresholds) to attain ‘employment equity’ in the workplace.
In practice, according to the ANC, this requires 75% African representation at management (and all other) levels, based on the fact that Africans make up 75% of the economically active population.
However, in 2013 a mere 36% of economically active Africans fell within the 35-64 age cohort from which managers can realistically be drawn. In addition, more than 1.2m Africans within this age group were unemployed. Factoring in age and employment status, the target for African representation at management level should be put at 30%, not 75%. If the need for post-school education for many management jobs is taken into account as well, then even a 30% target is too ambitious as only 4.1% of Africans have any tertiary training.
When these factors are taken into account, the alleged ‘under-representation’ of Africans in management posts largely disappears. Moreover, as the Commission for Employment Equity reports, among private sector employers African representation at the professionally skilled level (formerly termed junior management) stood at 32% in 2012/13. In addition, Africans made up 12% of senior managers and 9% of top ones.
These figures underscore the major effort that business has already made in implementing affirmative action despite the age, employment, and skills profile of the African population.
There is therefore no need to take a big stick to business in the way the Bill envisages.
At the same time, racial quotas, even if set at a more realistic level, are intrinsically unacceptable in a constitutional democracy founded on non-racialism. In addition, the changes introduced by the Bill will be highly damaging to investment, growth, and jobs - and hence to the vast majority of black South Africans.
At present, the Department of Labour (DoL), in seeking to punish a designated employer for non-compliance with the Act, must begin by showing the size of the pool of suitably qualified Africans from which employers can reasonably be expected to promote or employ. The Department also has to take into account the financial circumstances of the employer, relevant economic factors within his sector, and the progress made by other employers in filling racial quotas.
The Bill strips out these defences, along with the onus currently resting on the Department. Instead, it requires the employer to show the ‘reasonable steps’ he has taken to comply, and allows him to put forward ‘any reasonable ground’ to justify any failure to comply. But how much weight the DoL will attach to the skills shortage or other relevant factors remains uncertain.
The Bill also makes it quicker and easier for the DoL to take non-compliant employers before the Labour Court for punishment. In addition, maximum fines for failing to fulfill a racial quota will more than treble, from R500,000 for a first ‘offence’ to either R1.5m, or 2% of turnover, whichever is the greater. For a fifth transgression within three years, maximum fines will rise from R900,000 to either R2.7m, or to 10% of annual turnover, which is the higher.
Annual turnover is, of course, very different from annual profit. These fines, as the government’s own regulatory impact analysis (RIA) has warned, are thus high enough to put many firms out of business and stifle economic growth. Moreover, business is to be penalised in this draconian way for failing to meet racial quotas which are intrinsically unrealistic.
In addition, if firms are driven to attain the 75% target to avoid these harsh penalties, many could become less competitive. As FW de Klerk said some years ago: “No organisation will long survive if competence and merit are not also critical criteria. If businesses are constantly coerced to appoint unqualified people to key positions, there is no reason to suppose that they will fare any better than our failed municipalities and government departments.”
In addition, the poor black majority will derive no benefit from the Bill, as most are too poorly skilled to have any prospect of appointment to management posts. Instead, the truly disadvantaged will suffer even more as existing businesses close down, potential investors turn away, and economic growth falters still further.
The DA had only to read the State’s own RIA to understand the dangers in this Bill and vote against it. Instead, it has betrayed the truly disadvantaged - and helped put paid to any hopes of the rapid economic growth required to put all South Africans on the path to prosperity – in the hope of winning more black votes in the 2014 election.
But the party seems to want to have its cake and eat it too. The Bill will also, of course, reduce the job prospects of the white, coloured, and Indian voters on which the DA has thus far relied. So, the DA is keeping quiet about its endorsement of the Bill, in the hope perhaps that none but ‘buppies’ (black upwardly mobile professionals) will notice what it has done.
The DA no doubt hopes its traditional support base will stay with it because the ANC is so corrupt and incompetent. But the more the DA shifts on to the ANC’s policy ground, the less there is to distinguish the official ‘opposition’ from the ruling party. DM
Dr Anthea Jeffery is the Head of Special Research, South African Institute of Race Relations