active population but only 3% of the national one. Indians throughout South Africa were also likely to be affected, as they already held more management and professional posts (9.5% at senior management level, for example) than their share of national demographics would allow – and could thus be seen as being ‘over-represented’ in many state entities and private firms.121
The Department of Labour initially denied that the draft regulations would prejudice coloured and Indian people, insisting that they ‘could not be discriminatory as the same yardstick is applied to all’. However, the minister later yielded to widespread condemnation, announcing in May 2014 that the proposed ‘guide’ had been withdrawn. Nonetheless, the government’s preference for national demographics is already evident in the decisions of some of its provincial departments.122
The Department of Correctional Services in the Western Cape, for one, has recently refused to appoint or promote several coloured people because its 9% coloured quota, based on national demographics, had already been exceeded. The department’s employment equity plan adds that coloured men are ‘grossly over-represented’ and stresses the need to accelerate the ‘down management … of our coloured colleagues’.
In 2013, with the help of Solidarity and the FW de Klerk Foundation, nine coloured employees challenged the validity of the department’s refusal to promote them, saying this contradicted both the Constitution and the EE Act. In the apartheid era they had been too black to warrant promotion, but now ‘they were classified as coloured’ and barred from promotion for that reason. Solidarity added that the department’s policy unjustly discriminated against a million coloured people, whom the ANC seemed to regard as surplus to requirements in the Western Cape.123
In October 2013 the Labour Court in Cape Town ruled in favour of the nine coloured employees, finding that all of them had suffered unfair discrimination. Judge Hilary Rabkin-Naicker ordered the department to ensure that both national and regional demographics were taken into account in future when deciding on equity targets.124 It remains to be seen, however, whether this ruling will suffice to persuade the department (and many other employers) to stop ‘managing down’ their coloured and Indian employees by refusing to appoint or promote them to senior posts.
Stiffer penalties
Under the 1998 EE Act, maximum fines for various ‘offences’, including a failure to fulfil racial targets, range from R500 000 for a first transgression to R900 000 for a fifth similar one within three years. Under the Amendment Act, by contrast, maximum fines for failing to meet racial targets are to start, for a first contravention, either at R1.5 million (three times the current maximum) or 2% of annual turnover, whichever is the greater. For a fifth similar contravention within three years, maximum fines will be either R2.7 million (again three times the present penalty) or 10% of annual turnover, whichever is the larger.125
Fines of this magnitude will also apply to designated employers who fail to adopt successive employment equity plans, implement any measures the director-general of labour has instructed them to undertake, or submit their employment equity reports to the Department of Labour every year.126
For less serious offences, the possibility of fines based on a proportion of turnover will not apply. Hence, maximum fines for employers who fail to analyse their workforces (so as to assess the degree of black under-representation within them) will range from R1.5 million for a first offence to R2.7 million for a fifth similar contravention within three years. Fines of the same magnitude will also apply to designated employers who fail to keep prescribed records, assign senior managers to oversee their employment equity initiatives, put up workplace notices informing employees about the EE Act, or supply the director-general of labour with such information as he may request.127
The penalties set out in the Amendment Act are extraordinarily high. As the government’s own regulatory impact analysis has warned, such fines are high enough to push many firms into bankruptcy. Since net profits generally run at well below 10% of turnover, the penalties now laid down could contribute to ‘company contraction and retrenchments, and even company closure, resulting in job losses and negative impacts on economic growth’, the analysis warns. But the country cannot afford any increase in the unemployment rate, which has long hovered at around 25% on the official definition, which excludes discouraged workers no longer actively seeking jobs. Moreover, on the expanded definition which includes such individuals, the jobless rate rises to 37% in general and to 67% among young people aged between 15 and 24.128
Responses to the amendments
Business Unity South Africa, the voice of business at Nedlac, has generally endorsed the amendments. According to Busa, it matters little that they strip away current defences for employers, as firms will still be able to raise ‘any reasonable ground’ for any failure to meet racial targets. In addition, Busa supports the removal of current rights to object or appeal against compliance orders, saying it is important for the Department of Labour to be able to speed up enforcement procedures. Despite the major changes made, Busa also claims that the amendments ‘do not go any further than the [1998] Act’.129 In downplaying the harm likely to result from the changes, Busa has done less to defend business interests than the department’s own regulatory impact analysis, which warned that the new penalties could push many firms into bankruptcy.
One of the few businessmen to speak out against the amendments was Coenraad Bezuidenhout, executive director of the Manufacturing Circle, who said: ‘The Employment Equity Amendment Bill … heralds numerous changes that business warns against. Business will no longer be able to appeal against government compliance orders, may be taken to court more quickly and more regularly for non-compliance, and may be punished by punitive fines … The dictum that transformation needs economic growth [to succeed] appears to have been forgotten. Barely 40% of working-age adults in South Africa are employed at all, yet the government sees fit to tighten the noose around the neck [of private firms].’
Bezuidenhout warned that, unlike government departments, businesses do not work with budgets that ‘automatically get replenished every year. The worst case scenario for low productivity and high vacancy rates is not redeployment, but bankruptcy’. He cautions that employment equity ‘will simply kill off businesses and employment growth where demographic representivity is [not easily] attainable’.130
Despite the salience of this warning, there were few objections to the amendments when they came before the National Assembly for adoption in October 2013. The only opposition party to vote against the Bill was the Freedom Front Plus, which said the changes could ‘cause irreparable harm to the country’s economy’. The Democratic Alliance endorsed the amendments, even though the party’s leader, Helen Zille, had earlier urged her caucus to oppose them because they ignored skills constraints (the ‘supply-side crisis’) and ‘pretended that if demand was beaten into shape, outcomes would change and improve’. This approach, Zille warned, would ‘deter investment, kill jobs … and shrink the economy’, which would be ‘bad for black advancement’.
However, the DA’s parliamentary leader, Lindiwe Mazibuko, seemed unconvinced, querying what ‘substantiation’ there was for ‘the claim that the Bill would curb black advancement’. This exchange marked the beginning of an apparent caucus rebellion, which resulted in the DA’s voting for the amendments in the National Assembly, despite Zille’s views. Zille said the DA had endorsed the amendments by mistake, but clearly this was not so.131
Criticism of the DA grew, prompting Mazibuko to announce that her party had problems with virtually all of the amendments, including the proposed penalty provisions. The DA would thus push for various changes when the measure came before the National Council of Provinces (NCOP), the upper house of Parliament. But the NCOP refused to make these changes, prompting the DA to vote against the measure this time round. The amendments were nevertheless adopted with the support of the ANC and most other opposition parties.132
The ANC criticised
