Businesses readying for a big fight over new BEE laws in South Africa

 ·2 Jun 2023

Some businesses in South Africa are coming together to discuss and workshop a way to navigate the country’s new black economic empowerment laws and proposed racial targets for various sectors.

Trade union Solidarity – vehemently opposed to the new laws and is exploring legal avenues to challenge them – is spearheading an initiative to draw as many South African businesses together as possible to challenge the laws on the ground.

The union this week sent out a letter to over 2,000 businesses in the country, calling for “positive protest”. Some businesses have already heeded the call and are joining a workshop where they will discuss their opposition to the laws and try to coordinate actions against them.

“We expect that this workshop will be the start of a massive protest across a wide front against the government’s race law and its regulations. It will have a significant influence on the South African race discourse,” the union said.

Business groups and opposition parties are pushing back hard against the new Employment Equity Amendment Act, which was recently assented to by President Cyril Ramaphosa.

While not yet in effect – the laws are expected to be promulgated in September – the Department of Employment and Labour has already gazetted draft sectoral employment equity targets for designated businesses in South Africa for public comment.

Under the new Act, the employment minister is empowered to set sector-specific numerical targets for the racial and gender makeup of designated businesses, which must be achieved over five years.

The targets are expressed as a percentage of the population, either nationally or provincially, and it is up to designated businesses to choose one or the other in executing their transformation plans, the department said. Failure to comply with the laws can result in penalties, such as fines.

Designated businesses are all businesses in South Africa that employ more than 50 people. The laws apply to all designated businesses – even those that have no intention of doing business with the state.

Companies seeking to do business with the government will also need a Certificate of Compliance from the department. Furthermore, the EE Act requires employers to submit employment equity plans and annual reports on their progress in meeting the targets.

The backlash to the new laws was immediate, with legal experts poking holes in the gazetted targets, while also warning that, if implemented in a rigid manner, businesses could end up enforcing quotas, which are unconstitutional and unlawful.

The government has repeatedly stressed that the sectoral targets are flexible and need to be reached over a long period of time (five years), so they do not amount to quotas.

However, Solidarity has argued that the stark reality of jobs and work in South Africa means they cannot be implemented in any other way.

According to the Solidarity Research Institute (SRI), there are only two ways that the sectoral targets can be reached – either the economy has to grow so more jobs can be created to absorb the requisite people to hit the targets, or – more likely – the current composition of workers needs to be replaced to represent the targeted spread.

“Using the minister’s published targets as well as the Commission for Employment Equity’s annual report as source data, (the SRI) indicates that South Africa’s economy must grow at a national GDP of approximately 12.3% per year, sustained over the next five years to meet the minister’s targets,” the union said.

“Given the current economic conditions in South Africa, these levels of growth are impossible and unattainable.”

This leaves only the second option, it said – people would have to vacate their positions in whatever way.

“Calculations made by the SRI, again using the minister’s published targets as well as the Commission for Employment Equity’s annual report as source data, indicate that a reduction of approximately 66% of white and Indian employees, as well as a reduction of approximately 25% of coloured employees at the top four job levels will be required to meet the minister’s targets.

“Basically, two out of three white and Indian employees, and one out of four coloured employees may no longer be represented at the top four job levels to meet the minister’s targets,” it said.

The Democratic Alliance – another big critic of the laws – said that over 600,000 white, coloured and Indian South Africans stand to lose their jobs if the targets are pushed onto businesses. The party has also characterised the targets as racial quotas.

In rallying businesses to protest the new laws and proposed targets, Solidarity echoed this sentiment.

“Providing more job opportunities for black people is a legitimate goal – which is true for all people – but this Act is going about it in the wrong way. It does not create jobs; it simply redistributes it and will lead to poorer service delivery and fewer job opportunities,” it said.

“It gives draconian powers to the Minister of Employment and Labour to dictate to businesses who they may employ. Now South African society can be planned and manipulated from a central point according to race. It deprives employers of the right to do business, and it deprives employees of the right to be employed.”

Read: South Africa’s strict new BEE and transformation laws – what you need to know

Show comments
Subscribe to our daily newsletter