South African banks threatened with legal action over transformation

The Department of Labour and Employment is threatening to bring Standard Bank, Absa, and FNB before the courts for non-compliance with employment equity legislation.

These banks have reportedly failed to ensure that their employee demographics reflect the demographics of South Africa.

In particular, senior management at these banks remains untransformed, according to the department.

The department conducted a study in the first quarter of 2023 of JSE-listed companies to determine whether they are compliant with employment equity legislation.

The study found that 99% of private sector employers are non-compliant, with the other 1% only compliant administratively and substantively.

Substantive compliance refers to an active willingness to ensure equal opportunities are given to designated groups.

The department has threatened to go to court to impose a penalty of R1.5 million or 2% of turnover, whichever is greater.

Fikiswa Mcanca-Bede, a chief director at the department, said that JSE-listed companies do not have an appetite to transform.

Mcanca-Bede told Business Times, “I do not think they see a need to transform. Either they do not have confidence in women or they do not have confidence in black people”.

Standard Bank, Absa, and FNB are in talks with the department over the possible implementation of penalties.

Absa has publicly stated that it fully complies with the legislation and is committed to further transforming its business.

The department offers an alternative – learnerships and internships for designated groups at the banks to bridge the skills gap.

Mcanca-Bede thinks this is better than a monetary penalty as it helps address the underlying issues of a lack of skills and the country’s employment crisis.

Such an alternative is not new, with the Department taking a similar approach with Chinese telecommunications company Huawei.

Huawei was found non-compliant with employment equity legislation last year and negotiated with the department to reduce the penalty it would receive.

The Chinese company was thus pushed into providing learnerships and internships for 120 individuals from designated groups. Huawei was also obliged to employ them afterwards.

Change of focus

Mcanca-Bede said that the clampdown on some of the country’s largest banks was part of a shift in focus from the department.

The department is moving its attention to larger companies, particularly listed companies.

According to Mcanca-Bede, the department is “refocusing our capacity and strategy to ensure that we target the big companies more than anything”.

This shift is coupled with Minister Thulas Nxesi’s new Employment Equity Act, which was signed into law last month.

Amendments to the existing Employment Equity Act aim to promote diversity and equality in the workplace while empowering the government to set specific equity targets by sector and region.

Employment and Labour Minister Thulas Nxesi would be enabled by the Act to unilaterally declare sector-specific employment equity targets and determine compliance criteria.

Employment equity targets and compliance will be effectively at the minister’s discretion.

Companies with more than 50 employees will have to submit employment equity plans to the Department of Employment and Labour outlining how they plan on meeting employment equity targets.

Sakeliga and Solidarity are challenging the Act in the country’s courts.