Strict new transformation laws coming for South Africa – what you need to know

 ·11 Nov 2022

Legal experts at Cliffe Dekker Hofmeyr (CDH) have highlighted the potential impact of the newly amended Employment Equity (EE) Act that empowers the employment and labour minister to regulate sectorial EE targets and compliance criteria – and what it means for businesses in South Africa.

The newly amended EE Act is awaiting the president’s signature and is set to come into operation in September 2023. The bill aims to aid workplace transformation in South Africa and make it easier for small and medium-sized enterprises (SMEs) to conduct business.

CDH noted that a key aspect of the changes in law relates to the term “designated employer”, as it is these employers that the laws directly address.

Under the current act, a “designated employer” is an employer that employs 50 or more employees or an employer that employs fewer than 50 employees but has an annual turnover that is equal to or above the threshold determined by the EE Act depending on the relevant sector, said CDH associate Abigail Butcher.

She added that if a business meets this definition of a designated employer, it is required to comply with the EE Act. By contrast, those who do not meet the definition are exempt from compliance but are open to doing it voluntarily.

Changes for small and medium-sized businesses

This designated employer definition has now changed under the amended bill in those employers that employ fewer than 50 employees, irrespective of their annual turnover, will no longer form part of the designated employer definition and, therefore, will be exempt from compliance, Butcher said.

“This seems to be a move by the department of labour, amid an outcry from SMEs that the current bill is quite burdensome, to encourage the development of small businesses and make conducting business in South Africa easier as they’ll no longer have to develop and implement EE plans or submit EE reports to the department,” she said.

This is quite a significant change as these companies will not be required to implement measures to ensure suitably qualified people from designated groups have equal employment opportunities and are represented at all occupational levels in the workplace, explained Butcher.

This includes not having to analyse employment policies, practices, and procedures in the working environment to identify employment barriers to designated groups.

However, she added that designated employer or not, all businesses are bound to the provisions of the EE Act regarding the prohibition of unfair discrimination.

Changes for big business

For the big businesses that fall under the definition of a designated employer, Butcher noted that the most impactful change is the empowerment of the employment and labour minister to regulate sectorial EE targets and compliance criteria.

This means EE targets for different sectors will be at the minister’s discretion. While these targets are not yet known, designated employers will have to keep a close watch on the regulations that the minister puts in place as it has a significant practical impact on the way that they are compliant with the act, said Butcher.

She added that the department’s purpose in implementing these different targets is to ensure equitable representation of people from historically disadvantaged groups such as race, gender, and disability in all levels of the workplace.

Before the amendment, employers could set their own goals in compliance with the EE Act, considering various factors such as labour turnover, organisational growth, skills availability, and considering the economically active population, Butcher said.

She added that, now, this right is afforded to the minister, and any numerical target imposed by him will have to be complied with – meaning any EE plans that have been envisaged to operate between three to five years at present will fall away and have to be revised, which is quite burdensome.

Acting deputy director-general of Labour Policy and Industrial Relations, Thembinkosi Mkalipi, said a new EE online assessment system would be created to monitor the implementation of sector targets, and the assessment will be done annually.

Read: Government clarifies big changes to BEE laws in South Africa

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