Massive storm brewing for businesses employing more than 50 people in South Africa

Business groups are preparing a legal fightback against South Africa’s new Employment Equity Amendment Act (EEAA), which will come into effect on 1 January 2025.

At the end of November, President Cyril Ramaphosa proclaimed that the EEAA would come into effect next year, lining up significant changes and strict new BEE regulations for businesses that employ more than 50 people.

The EEAA was signed into law in April 2023. While the regulations mostly impact so-called “designated employers”—those employing more than 50 people—some of the laws also affect all businesses.

According to Kerry Fredericks, director at Werksmans Attorneys, the most noteworthy amendments empower the Minister of Employment and Labour to set numerical racial targets for 18 different sectors in the country.

These targets aim to make workforces reflect the racial makeup of the country, nationally, or more locally.

Critics have said the targets amount to racial quotas—which are unlawful in South Africa.

However, the department has denied this, saying that the targets cannot be quotas as they are flexible, businesses can be exempted, and the timelines give space for the sectors to achieve them.

Once established, designated employers must comply with these sectoral targets. Failure to meet the targets could result in hefty penalties, including millions of rands in fines.

“While two separate and vastly different draft regulations setting out proposed sectoral targets have already been published, the Minister has yet to issue a final version of such regulations. This has led to some uncertainty and concern amongst the various sectors,” Fredericks said.

Other, notable amendments which will come into effect as of 1 January 2025 include:

• Under the dispensation of the EEAA, designated employers who fail to comply with the sectoral targets could be precluded from conducting business with the government.
• Employers who employ less than 50 employees will no longer be considered to be designated employers, regardless of the employer’s annual turnover. Previously, employers who employed less than 50 employees but whose annual turnover exceeded a specific threshold, were considered designated employers.
• The definition of ‘people with disabilities’ has been extended to include people with intellectual or sensory impairments which may limit their prospects of entry into, or advancement in, employment;
• Psychometric testing of employees or applicants for employment is no longer required to be certified by the Health Professionals Council of South Africa or a similar body in order for the same to be permitted for use;
• The EEA2 reports no longer need to be signed by the Chief Executive Office of a designated employer;
• In assessing a designated employer’s compliance with its obligations, a designated employer’s compliance with sectoral targets set by the Minister may be taken into account;

With the ‘launch’ date of the new laws around the corner, businesses are already starting to push back against the implementation.

Business group Sakeliga said that it is preparing legal challenges to the laws. It warned that the regulations will have significant implications for international firms, while maintaining that the state lacks the capacity to enforce and administer the laws.

“Comprehensive legal challenges by Sakeliga and others to counter the EEAA and forthcoming regulations are on the way,” the group said.

“The department (of employment and labour) and state, in general, lack the capability and resources to police employers at the required scale. Because the amendment act demands both the impossible and the unethical, most businesses will continue to avoid and defy it with clear consciences.”

The group said the laws were irrational, harmful, and unconstitutional and that businesses should prepare for “maximum achievable non-cooperation…for as long as it takes to have it scrapped or rendered practically impotent.”

“Sakeliga will litigate the broader legislative and policy issues in the EEAA and its regulations. We recommend that businesses seeking advice on their specific circumstances contact and consider joining the National Employers’ Association of South Africa (NEASA),” it said.

Read: South Africa’s new BEE targets – the massive dilemma for businesses