South Africa’s strict new BEE and transformation laws – what you need to know
President Cyril Ramaphosa has signed the Employment Equity Amendment Bill of 2020 into law, heralding a host of new controversial transformation laws that will have a significant impact on businesses and employment in South Africa.
The new laws give the minister of employment and labour wide-ranging powers to establish set employment equity targets across various sectors of the economy. Businesses will also need to establish employment equity plans, do annual reporting and acquire compliance certificates showing they are following the laws, in order to do business with the state.
The laws also alter the definition of ‘designated employers’ – companies that are required to comply with the changes. Designated employers are now any business, irrespective of turnover, that employ more than 50 people. Designated employers must comply with the laws even if they do not intend on doing business with the state.
Failure to comply with the laws can result in penalties, such as fines.
Businesses have already raised concerns over the new laws, while unions and other business interest groups are gearing up to launch legal challenges.
In the interim, the changes are now law – but they are not yet in effect.
Legal firm, Bowmans, has broken down some of the most pertinent points of the new laws, and where they currently stand. Melissa Cogger and Talita Laubscher have answered some of the most common questions being raised by employers:
Are the amendments in force yet?
The Employment Equity Amendment Act, 2022 was assented to by the President on 6 April 2023. The amendments are not yet in force.
They will take effect on a date fixed by the President by proclamation in the Government Gazette.
In a previous media release by the Department of Employment and Labour it was announced that the amendments would take effect on 1 September 2023 but this still needs to be confirmed.
Are the sectoral targets published yet?
One of the amendments to the Employment Equity Act is that the Minister of Employment and Labour may identify sectors and publish sectoral targets after a consultation process with the sector concerned.
The Minister has not yet definitively determined these sectors, consulted on sectoral targets or published them.
While consultation processes were undertaken during 2021 to 2022 with various stakeholders in a number of sectors and proposed sector targets were discussed, the Amendment Act requires a multi-stage process before sectors are identified or sectoral targets are set.
This includes:
- The publication of a draft notice identifying specific national economic sectors which permits interested parties at least 30 days to comment;
- Once the sectors are identified in the Government Gazette, the Minister will then be obliged to consult with the relevant sectors, and take advice from the National Minimum Wage Commission;
- The Minister will then publish a draft notice of numerical targets in the Government Gazette, allowing interested parties at least 30 days to comment; and
- Once the above process of consultation and comment is complete, the Minister will publish a notice in the Government Gazette setting out the sectoral numerical targets.
While stakeholders have previously been consulted, the Department is still required to conduct fresh consultations and cannot retrospectively apply previous consultation processes, without risk of legal challenge.
Can employers simply apply the sectoral targets?
No. A designated employer is obliged to consult with representatives of its employees on the preparation and implementation of its employment equity plan and its analysis of the degree of underrepresentation of people from designated groups in various occupational levels in the workforce.
This necessarily entails consultation on any numerical goals set to achieve the equitable representation of suitably qualified people from designated groups within each occupational level in the workforce, the timetable within which this is to be achieved, and the strategies intended to achieve the goals.
The numerical goals are a designated employer’s projection of which it seeks to achieve at the end of its current employment equity plan in relation to its entire workforce.
Numerical targets are a designated employer’s projection of what it seeks to achieve at the end of its current reporting period (annually). The amendments require numerical goals to comply with any sectoral target applicable to the designated employer.
Designated employers will thus be setting their numerical goals and targets in line with the sectoral targets in future.
An employment equity plan must include a timetable for the achievement of the goals and objectives in each year of the plan. The employment equity plan cannot be shorter than one year but may not be longer than five years.
The designated employer must have procedures to monitor and evaluate the implementation of the plan over the time period. By the time the sectoral targets are published, a designated employer may only be part way through its current employment equity plan.
In this case, a designated employer will be required to revise its plan in line with the amendments, which will include the requirement to take into account sectoral targets when setting numerical goals.
What if the employer fails to meet its targets?
The Employment Equity Act, 1998 contemplates that a designated employer will be given an opportunity to justify non-compliance with numerical targets, on a case-by-case basis before both the Director-General and the Labour Court prior to the imposition of any fine.
The draft regulations set out examples of justifiable reasons for not complying with targets, which include for example, insufficient recruitment opportunities, insufficient promotion opportunities, insufficient target individuals from the designated groups with the relevant qualifications, skills and experience, mergers and acquisitions, transfers, and impacts on business economic activities.
Read: Ramaphosa signs major new BEE and transformation rules for South Africa into law
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