Bad news for South African companies with more than 50 employees

The Constitutional Court has denied petitions from civil society organisations to block the implementation of the government’s new employment equity targets. 

The petitions were brought by the National Employers’ Association of South Africa (NEASA) and Sakeliga to prevent the new targets from coming into effect. 

These targets are contained in the Employment Equity Amendment Act and mark a significant shift in how South Africa enforces workplace transformation. 

As opposed to letting every company establish its own baseline goals, the government now regulates minimum demographic targets for specific industries.

The targets are also not uniform within businesses, as they have a specific focus on shifting demographic representation within management positions and skilled roles. 

Under the act, the targets set out specific percentage targets for particular races, genders, and disabilities. 

In effect, companies will have to adapt their workforce to match the prescribed percentage breakdowns from the Department of Employment and Labour. 

One of the major changes is the imposition of the headcount-only definition, for which businesses have to comply or not.

The amendments to the act eliminate the old annual business turnover threshold. Now, all companies with 50 or more employees have to comply with the targets.

Regardless of how much money a company generates, if it has fewer than 50 employees, it will be exempt from the new targets. 

Minister of Labour Nomakhosazana Meth welcomed the dismissal of Part A of the application from NEASA and Sakeliga.

NEASA and Sakeliga sought to interdict the implementation of the new regulations and the five-year sector numerical targets.

“In the absence of any court interdict, the Department is therefore forging ahead with the implementation of the EE regulations and five-year targets,” Meth said in a statement. 

The ANC also celebrated the ruling, saying that it affirms the constitutional imperative of advancing substantive transformation in the workplace.

“The ruling represents another important milestone in South Africa’s ongoing journey towards building a more inclusive, representative and equitable economy,” the ANC said.

More compliance means more businesses will shut down

NEASA CEO Gerhard Papenfus believes the courts have failed employers by refusing to interdict the amended regulations. 

The attempts by both NEASA and Sakeliga to stop the new targets from taking effect were rejected by the High Court, the Supreme Court of Appeal, and, now, the Constitutional Court. 

However, Papenfus made it clear in a video posted by NEASA that while Part A has been dismissed, Part B remains in play. 

Part B is an attempt by NEASA and Sakeliga to review and set aside the minister’s decision to set these targets entirely. This case is currently before the High Court. 

While Papenfus retains hope for ultimate victory, he said that businesses cannot be expected to commit themselves to oblivion in the meantime. 

He called on businesses to comply with these targets as the law, but also said that they should not do more than what is required of them. 

“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 made it clear that appointments should be made purely on the basis of merit and not to meet 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. 

He called on businesses to continue hiring individuals based on their ability and select the best people for the job. 

Papenfus also warned that employing individuals on the basis of race or gender will destroy productivity and lead to business 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.”