Warning about new employment equity targets for South African companies with more than 50 employees

The government is implementing various initiatives to tighten Black Economic Empowerment (BEE) requirements, including the enforcement of the new Employment Equity Act. 

This is likely to result in companies losing key skills in the form of individuals who do not help businesses meet these onerous targets. 

As such, South African businesses will become less competitive by losing skilled individuals who will effectively be forced to be self-employed. 

The Institute of Race Relations’ head of policy research, Anthea Jeffery, explained that the new Act will give the Labour Minister the power to set specific demographic targets for local businesses. 

This is vastly different from the previous set of regulations that allowed companies to establish their own baseline goals. 

Now, the government will determine minimum demographic targets for specific industries and particular positions within companies. 

The targets focus on shifting demographic representation within management positions and skilled roles. Companies will have to change their workforce to match the government-determined percentage. 

All businesses with more than 50 employees, regardless of turnover, will have to comply with the targets set by the Labour Minister. 

“Instead of seeing BEE being rolled back by the government, we have seen various initiatives to tighten it up, including the Employment Equity Act,” Jeffery told the Free Market Foundation. 

“The minister now sets targets for 18 different sectors across the economy, and people are now expected to comply with these targets within five years.” 

Jeffery explained that there are indications that the percentage of white males in various positions will be reduced to 4%. 

In some cases, white males will not be allowed to occupy particular positions in specific sectors at all.

Jeffery said this is very damaging to the South African economy, given that most of the highly-skilled individuals are white males. 

There has not been adequate investment and reform in the education system to change this reality. As such, many businesses will have to get rid of these skilled individuals to comply. 

Businesses will shut down

Jeffery echoed civil society organisations who warned that many businesses will have to shut down under the weight of additional compliance from the act. 

Many South African companies cannot afford to comply with the country’s onerous regulatory regime, which has only grown in recent years. 

Apart from the additional regulatory compliance from the act, it will also result in businesses losing skilled individuals who are vital for their operations. 

Jeffery described this as a form of social engineering, with the government’s will being imposed from the top down on all businesses in South Africa. 

“The government is imposing its will, so that what it wants is what business must comply with, irrespective of whether it makes business sense or not,” Jeffery said. 

“It does have really dreadful consequences for so many groups of people, including the black majority, because it is a deterrent to investment. It means we will have lower growth and fewer jobs.” 

This echoes a warning from National Employers’ Association of South Africa (NEASA) CEO Gerhard Papenfus, who said the new regulations will see companies shut down. 

Papenfus said that the new targets are part of a growing compliance burden that very few businesses can afford in South Africa. 

While Papenfus is hopeful of a legal victory against the regulations, he said that businesses cannot be expected to sustain the burden in the meantime. 

“Operating within the law does not mean surrendering your business. You must do a workplace analysis, draw up an EE plan, and engage with employees,” Papenfus said. 

“These are procedural requirements. Do them properly. However, this is where compliance stops. You cannot comply your business into oblivion.” 

Papenfus urged business leaders to continue making appointments based on merit and not based on arbitrary requirements from the government. 

“You cannot follow targets that would destroy your business. You cannot follow an artificial spreadsheet at the cost of your company’s viability,” Papenfus said. 

Papenfus said that following the new regulations will destroy the productivity of businesses and lead to their failure. 

This will ultimately result in fewer employment opportunities for South Africans and less empowerment, undermining the state’s goals. 

“Do not set targets that you cannot meet, or by hiring incompetent people. Employ the best person for the job,” Papenfus said. 

“Document it meticulously. Every hiring decision. Every interview. Create a record that shows you appointed the best person.”