Employment Equity Amendment Bill: public hearings day 1
Employment and Labour
13 April 2021
Chairperson: Ms M Dunjwa (ANC)
Video: PC Labour 13 April 2021
The Committee held virtual public hearings on the Employment Equity Amendment Bill.
Sakeliga said that the Bill is undesirable and should be withdrawn as clause 4 is unconstitutional, given the Constitution’s disapproval of race-based public policy. Further clause 12 provides that the Minister may only issue a certificate of compliance allowing an employer to tender for state contracts if the Minister is satisfied that the employer has complied with the set numerical targets. The potential chain-reaction throughout the economy is cause for concern. It would disincentivise foreign investors and add to the compliance burden. It is worrisome that a socio-economic impact assessment (SEIA) on the Bill is not available. The adoption of an economic intervention with potentially far-reaching consequences needed to quantify the scope of those consequences.
The South African Institute of Race Relations (SAIRR) said the Bill is likely to trigger both disinvestment and emigration. It will also deter investment, limit growth, reduce employment, add to inequality, and make recovery from the Covid-19 lockdown, which has caused unprecedented damage to an already ailing economy, harder to achieve. No SEIA has been appended to the Bill to help inform the public in providing their comment. SAIRR proposed a voucher system for housing to address the social inequality in the country.
Committee members raised a concern about the voucher system as it would create a dependency on the state. It seemed SAIRR was saying the private sector should be left alone and the Bill must exclude them.
The Commission for Gender Equality highlighted the problems faced by women and persons with disabilities in the workplace because they are discriminated against especially in terms of the wage gap. The Commission had been receiving complaints.
COSATU supported the Bill which was long overdue and urged Parliament to pass it as soon as possible. It said Parliament should defend its progressive provisions and not be convinced by calls to remove or dilute these necessary interventions. It has taken many years to reach Parliament and It should not be delayed any further.
Mr Piet le Roux, Sakeliga Chief Executive, stated that Sakeliga is an independent business community that promotes a healthy business environment and a market-based institutional framework within a public order based on constitutionalism. A great many of Sakeliga’s nearly 12 000 members fit into the category of small enterprises. It is within this context that it regards itself as well-placed to provide insights into the shortcomings of the Employment Equity Amendment Bill.
Sakeliga opposes racial considerations in matters of public policy as a matter of moral principle, constitutional legality and commercial efficacy. It is harmful to society and indefensible for a government that taxes and regulates the conduct of all its citizens to pick and choose whom of those citizens to prefer and whom to disadvantage. It is unconstitutional, given the Constitution’s disapproval of race-based public policy. Finally, imposing political racial considerations onto economic actors gives rise to perverse incentives and distorts market signals and eventually leads to a lower standard of living for all South Africans, particularly poorer segments of society.
Clause 4 of the Bill provides for the determination of numerical targets to achieve demographic representivity in targeted economic sectors. The Minister “may” by notice “identify” such sectors. Curiously, the Minister may also “prescribe criteria that must be taken into account in identifying sectors and sub-sectors”. This is a perplexing provision, for the Minister is both the functionary who must prescribe the criteria and the functionary who must comply with the criteria. The Minister, in other words, is empowered to make rules for own conduct. This is impermissible in a legal regime that subscribes to the Rule of Law and the separation of powers. It is Parliament which must, in primary legislation, prescribe the criteria and requirements that must control the behaviour and actions of the executive, not the executive itself.
The clause provides the Minister “may” by notice “set numerical targets for any national economic sector identified”, “for the purpose of ensuring the equitable representation of suitably qualified people from designated groups at all occupational levels in the workforce”. The notice may contemplate “different numerical targets for different occupational levels, sub-sectors or regions within a sector or on the basis of any other relevant factor”.
Non-racialism is a fundamental postulate of the Constitution, contained in section 1(b) – a founding value. Section 9(1) of the Constitution further entrenches the right to equal treatment and benefit of the law to all South Africans, which clause 4 falls foul of. Section 9(2) of the Constitution guarantees that South Africans are entitled to full and equal enjoyment of the rights and freedoms guaranteed by the Constitution, and the government may take measures to ensure this is the case. Clause 4 amounts to the government taking a measure against this provision, as by implication not all South Africans will be enjoying the right to equality.
If government wishes to reverse the consequences of past racial discrimination, more racial discrimination is not the answer. Liberalising and deregulating the economic sectors identified by the Minister has a far greater likelihood of achieving justice, by ensuring more South Africans can participate in the formal economy without government barriers standing in the way.
Sakeliga recommends that clause 4 (and by implication clauses 6 and 11) be removed.
On the certificate of compliance, clause 12 provides that the Minister “may only” issue a certificate of compliance (allowing employers to tender for state contracts) if the Minister is satisfied that the employer has complied with the set numerical targets. If an enterprise does not comply with the quotas determined by the Minister, they do not qualify for contracts with the State.
The potential chain-reaction throughout the economy and society that this might cause is cause for concern. The prospect of not even qualifying for state contracts would certainly disincentivise foreign investors and add to the compliance burdens.
In line with our recommendation that the provision for the setting of numerical targets be removed, we recommend that this part of clause 12 also be removed. Clause 12 provides that the Minister may only issue a certificate of compliance, thus allowing enterprises to tender for state contracts, if the Minister “is satisfied” that that business has complied with the numerical targets set by the Minister. The Minister’s satisfaction is an insufficient legal control on a discretionary power. Clause 12 must be revised to provide that the Minister must issue a certificate of compliance if the business has complied with the requirements. It must not be discretionary, but automatic.
Mr Martin van Staden, Sakeliga: Legal Compliance, said it is worrisome that a socio-economic impact assessment (SEIA) on the Bill is not available. If one were conducted but not published, this was a concern. If no SEIA was conducted, the government has engaged in the adoption of an economic intervention with potentially far-reaching consequences without attempting to quantify the scope of those consequences. In either case, the government is in breach of the constitutional obligations of accountability and openness as in sections 1(d) and 195 of the Constitution.
The memorandum to the Bill explains that there are no implications for provinces and merely a R1.2 million cost implication for the Department of Employment and Labour. This is a gross oversimplification and a misrepresentation of the true state of affairs. How could the government have quantified the cost implications for this department if there is no accessible SEIA? One is forced to conclude that the government did engage in some form of impact assessment but decided to keep this assessment from public view. If the only conclusion of that assessment is the implausibly conservative R1.2 million then the assessment is incomplete and likely based on flawed premises and research.
Secondly, the implications for government cannot be limited to mere direct costs. With South Africa’s economy in the process of all but collapse, the added regulatory burdens in the Bill to a beleaguered commercial sector will have significant tax revenue and economic growth implications.
A great number of businesses, particularly those on the margin where compliance with empowerment legislation is becoming an operational imperative, will expend unnecessary costs on attempting to lessen the burden that this legislative regime will impose upon them. This might include the establishment of expensive compliance divisions, and stalling growth to remain under the radar of the empowerment authorities. Both these potential events are destructive to the bottom line of those businesses themselves, to the prosperity of the communities they serve, and to the fiscus which relies on those businesses’ growth, employment, and taxes.
Clause 4 is perplexing because it is Parliament, not the Minister, who must prescribe the criteria for the identification of economic sectors for numerical targets. This is a substantive legal issue – deciding to whom certain rules will apply – not a technical issue. We recommend that if Parliament wishes to proceed with this Bill and its very objectionable substantive content, clause 4 must be revised to remove the Minister’s power to prescribe criteria, and a sub-clause inserted where Parliament itself defines the criteria for the identification of economic sectors.
Clause 4 is however problematic for another reason. This provision contains no guiding or restraining criteria that circumscribes the Minister’s power, and as such amounts to an unqualified discretion. This is particularly problematic given that this contemplates racial differentiation. Differentiation can very easily become unconstitutional unfair discrimination. This is why it is important that Parliament set down detailed criteria for how the Minister must exercise this power. Indeed, the power to differentiate between sectors and subsectors is a power that Parliament, not the Minister, has. Sakeliga would prefer clause 4 to be removed from the Bill, primarily for substantive reasons, and because it will be tainted by incongruence with the Rule of Law.
According to a Department of Planning, Monitoring, and Evaluation (DPME) 2015 policy document, all new government policies, regulations and legislation must be accompanied by a SEIA.
It is concerning, therefore, that we have not had sight of a socio-economic impact assessment. If such an impact assessment exists, we humbly request making it publicly available for South Africans to interrogate it.
In conclusion Sakeliga is recommending not only the removal of the two principal innovations in clauses 4 and 12, but that the Employment Equity Amendment Bill is withdrawn. Moreover, we recommend that South African statutory law in general be aligned with the non-racial promise of the Constitution.
Sakeliga submits that instead of this Bill, the South African public, business community (and particularly small enterprises), and by implication the South African government, will be better served if an economic policy of 'more business, less politics' is adopted.
Dr M Cardo (DA) welcomed the submission. He asked why the timing of the Bill is a problem and if there is a better time to introduce the Bill considering the economic crisis in the country. He asked how Sakeliga reacted to criticism against the private sector.
Ms C Mkhonto (EFF) also welcomed the submission. She asked about the race breakdown and why the Western Cape was presented because it came across as if they promoted people not to seek employment in other provinces. She asked which section in the Constitution was contrary to the clause 4 of the Bill which deals with unfair discrimination.
Ms H Denner (FF+) asked if Mr van Staden could provide more information on clause 4. She asked if a socio-economic assessment was done and what was the motivation for the Bill?
Mr S Mdabe (ANC) was concerned about the racial breakdown and wanted Sakeliga to elaborate more on this.
The Chairperson told the Committee that she was concerned about the statement made by Mr van Staden on the role of legislation and asked what measuring stick was used to conclude this. She asked if Mr van Staden was familiar with the rules.
Response by Sakeliga
Mr le Roux replied that there is no appropriate time to introduce the Bill because it is undesirable – as it is a problematic Bill. The intention of the Bill should be checked to ensure that the rationale is reflected, as the Bill did not cover this. One may object that in a just country with equitable equality, it must mean that there is discrimination if the company does not cater for all races. If this is the yardstick then the country will fail. Around the world there are different demographics at every occupational level, and one needs to determine if it is a just world. The representivity method is not a viable one because communities and societies change all the time, as people seek employment elsewhere and move around for various reasons. People should not be forced to move – and this is what the Bill is trying to do. Considering South Africa’s history of forced removals, it shows the bad side of the Bill. He reiterated the importance of not forcing people to move to other areas.
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South African Institute of Race Relations (SAIRR) submission
Dr Anthea Jeffery, SAIRR Head of Policy Research, said SAIRR was formed in 1929 to oppose racial discrimination and promote racial goodwill. Its current objects are to promote democracy, human rights, development, and reconciliation between the peoples of South Africa.
Since 2015, all new legislation in South Africa has had to be subjected to a ‘socio-economic impact assessment’ before it is adopted. This must be done in terms of the Guidelines for the Socio-Economic Impact Assessment System (SEIAS) developed by DPME. The aim is to ensure that ‘the full costs of regulations and especially the impact on the economy’ are fully understood before new rules are introduced.
According to the Guidelines, SEIAS must be applied at various stages in the policy process. Once new legislation has been proposed, ‘an initial assessment’ must be conducted to identify different ‘options for addressing the problem’ and making ‘a rough evaluation’ of their respective costs and benefits. Thereafter, ‘appropriate consultation’ is needed, along with ‘a continual review of the impact assessment as the proposals evolve’.
A ‘final impact assessment’ must then be developed that ‘provides a detailed evaluation of the likely effects of the [proposed law] in terms of implementation and compliance costs as well as the anticipated outcome’. When a Bill is published ‘for public comment and consultation with stakeholders’, this final assessment must be attached to it. A particularly important need is to ‘identify when the burdens of change loom so large that they could lead to excessive costs to society, for instance through disinvestment by business or a loss of skills to emigration’.
The Bill is likely to trigger precisely such ‘excessive costs’, in the form of both disinvestment and emigration. It will also deter investment, limit growth, reduce employment, add to inequality, and make recovery from the Covid-19 lockdown, which has caused unprecedented damage to an already ailing economy, harder to achieve. Yet no proper SEIAS assessment of the Bill has been carried out, while no final SEIAS report has been appended to the Bill to help inform the public in providing their comment.
Instead, the Memorandum on the Objects of the Bill vastly understates the likely ‘financial implications’ of the Bill. Instead of trying to assess its negative impact on the entire society, the document focuses solely on if the Bill will result in increased implementation costs for the state. The Memorandum says the state is likely to incur R1.2m in additional expenses in implementing the Bill. This is because the Bill seeks to bring Section 53 of the 1998 Act into operation – and this provision (dormant up to now) requires designated employers wanting to do business with the government to obtain a certificate of employment equity (EE) compliance from the Minister.
This in turn has implications for National Treasury and its Chief Procurement Officer, as well as for the BEE Policy Unit within the Department of Trade and Industry and the Department of Mineral Resources and Energy (as the EE targets to be set for the mining sector need to be aligned to the provisions of the Mining Charter). In addition, the Commission for Conciliation, Mediation, and Arbitration (CCMA) will have to confirm that a designated employer has not breached the unfair discrimination provisions in the 1998 Act or the minimum wage rules laid down under the National Minimum Wage Act of 2018.
To ensure there is proper coordination between these state entities, ‘systems alignment is critical between the EE System, the CCMA Case Management System, and the National Minimum Wage System’, which deals with applications for exemption. However, the R1.2m that may be needed to increase coordination between different state entities is only a very small part of the Bill’s overall economic ramifications. Its likely negative effect in deterring reconstruction and recovery from the Covid-19 pandemic is the most important issue of all – and needs to be canvassed in full in the public participation process, not bypassed.
In terms of proper public participation, the legislative process is a vital aspect of South Africa’s democracy, as the Constitutional Court has repeatedly reaffirmed in judgments spanning a decade or more. These include Matatiele Municipality and Others v President of the Republic of South Africa and others, Doctors for Life International v Speaker of the National Assembly and Others, and Land Access Movement of South Africa and Others v Chairperson of the National Council of Provinces and Others. The key constitutional provisions are Sections 59, 72, and 118. According to Section 59(1) of the Constitution, the National Assembly ‘must facilitate public involvement in the legislative…processes of the Assembly and its Committees’. In the New Clicks case in the Constitutional Court, Mr Justice Albie Sachs noted that there were many ways in which public participation could be facilitated: ‘What matters is that…a reasonable opportunity is offered to members of the public and all interested parties to know about the issues and to have an adequate say’. This passage was quoted with approval in both Doctors for Life and in the Land Access case.
According to the Memorandum on the Objects of the Bill, the proposed amendments were discussed and negotiated at the National Economic Development and Labour Council (Nedlac) from October 2017 to April 2018. The draft Bill was then published for public comment, while public hearings were held in all nine provinces in October 2018. Comments received during this consultation process were taken into account in finalising the Bill.
The Memorandum implies that this public consultation process, which was carried out solely in 2018, was sufficient in crafting the current version of the Bill. However, it fails to take account of the fundamentally different economic environment the country now finds itself in as it grapples with the Covid-19 pandemic. This massive economic crisis must be taken fully into account, not brushed aside in the current consultation process.
Even before the Covid-19 crisis hit, South Africa had been downgraded to sub-investment or ‘junk’ status by all international ratings agencies. After almost a year of Covid-19 lockdowns, the country’s GDP has shrunk to an unprecedented extent, some 1.7 million people have lost their jobs, and tax revenues have tumbled. According to National Treasury’s projections in October 2020, public debt was set to soar to some 82% of GDP and then to 95% of GDP in 2025. The government needed to borrow roughly R2.2 billion a day, mainly to fund consumption spending, and the budget deficit was likely to rise to some 15% of GDP.
More recent figures show that tax revenue has held up better than expected, partly because of a sharp rally in commodity prices. This could result in a R100bn revenue overrun, compared to what was anticipated in October 2020. This unexpected revenue would reduce the main budget deficit to 12.5% of GDP and bring the gross-debt-to-GDP ratio down from 82% to about 79%. But these figures are still extremely high, especially for an emerging market economy such as South Africa. In addition, the unexpected revenue windfall could easily be squandered on the already high public sector wage bill, or on further bailouts for dysfunctional state-owned enterprises (SOEs).
Against this background, South Africa urgently needs an upsurge in foreign and local direct investment to jumpstart growth, expand employment, and quicken economic recovery. But this will become even more difficult to achieve if this Bill is enacted. Its unrealistic demands will serve as a major brake on reconstruction and recovery – and will do so at a time when market-friendly reforms have never been more vital.
Ms Jeffrey said that according to Thomas Sowell of Stanford University’s Hoover Institution, in his 1994 book on Race and Culture: ‘The even distribution or proportional representation of groups in occupations or institutions remains an intellectual construct defied by reality in society after society. Nor can this be attributed to exclusions or discrimination, for often some powerless or persecuted minorities predominate in prosperous occupations…. Attributing every “imbalance” to employer discrimination assumes away the manifest effects of differences in educational achievement, family upbringing, cultural traditions, [and] marital patterns… When one begins indulging assumptions like that, one has left reason behind and entered the realm of mysticism.
Sowell also highlights the importance of ‘culture’ – defined by him as ‘knowledge, skills, experiences, and habits’ – in explaining inter-group differences in countries across the world and over many centuries. His 1990s trilogy of books (Race and Culture, Migrations and Culture, and Conquests and Culture) points out that persistent disparities between racial groups are a notable feature within every heterogeneous society – and have very little to do with the racism that the ANC posits as their key cause.
Implementation of the 1998 Act has proceeded apace over the past 20 years – and particularly so in the public service. This is evident from the most recent report of the Employment Equity Commission (EEC) which monitors the statute’s implementation. Its 20th report shows that Africans made up 76.7% of top managers at the national level of government in March 2020. Within this same category, coloured people made up 8.3%, Indians 6.1% and whites 8.5%.
The supposed ‘norm’ of demographic representivity has thus largely been attained at this most senior level in the public service. This is despite the fact that the African population is a youthful one lacking necessary experience and that only 5.3% of Africans over the age of 20 have the university degrees that are generally needed or advisable for such senior jobs.
The EEC 2020 figures point to an astonishingly fast pace of EE implementation in the public service. This seems to have been achieved in three ways: by implementing rigid racial quotas rather than the more flexible ‘numerical goals’ mandated by the EE Act; by appointing black people without the necessary skills and experience; and by leaving important posts vacant where suitable black candidates cannot be found.
At Eskom – which has been crippled by unsustainable debt, inadequate maintenance, and repeated breakdowns at its ageing fleet of coal-fired power stations – human error is so common that it accounts for 40% of plant breakdowns. It may also have been a key factor in two explosions early in 2019 which put two units out of service. Public Enterprises Minister Pravin Gordhan has acknowledged that much of the malaise at the parastatal stems from the fact that ‘good people were lost and incompetent people put in their place’. He has also spoken of enticing back some of the white engineers who were earlier pushed out. Yet Eskom still plans to reduce further its white personnel – including experienced engineers and managers. Even in the face of an electricity crisis that threatens to destroy the economy, EE is still given priority.
Along the Vaal River, as a local business chamber commented in April 2019, sewage was being spilled ‘at record levels’ into ‘townships, suburbs, central business districts, schools, clinics, council buildings, apartment blocks and roads’. This has been confirmed via a South African Human Rights Commission (SAHRC) investigation which concluded that the cause of this dangerous pollution lies in the failure of the Emfuleni Municipality to maintain and operate its dilapidated wastewater treatment plants. The municipality had been warned ten years earlier that it lacked the skills to sustain its wastewater management systems and although the necessary skills were available in South Africa’ – it had failed to appoint skilled workers or develop capacity.
Water expert Anthony Turton, strategic advisor at TouchStone Resources, agrees that ‘South Africa is suffering from an “induced” deficit of engineering and other technical skills, and especially so at municipal level. This shortage can be traced directly to the government’s determined pursuit of narrowly defined racial targets at the expense of service delivery and economic growth. Were it not for this factor, the engineering skills available would meet present needs. If the government were willing to deracialise the appointment of technical skills, the current shortage would be overcome. Again, EE continues to trump all other considerations.
By September 1997, shortly before the initial EE Bill was published, 90% of the 150 large employers surveyed by a human resources consultancy, FSA-Contact, had affirmative action programmes in place, even though this was not required by law. The proportion of black people in senior management at these firms increased from 5% in 1995 to 12% in 1998 – and was projected to rise further to 21% in 2001, an overall increase of some 325%. The proportion of black people in middle management increased from 10% to 21% between 1994 and 1998, and was projected to increase to 29% by 2001.
Given the shortage of skilled black South Africans of an appropriate age for management posts, this increase in black representation was a notable achievement. It was made all the more remarkable by a simultaneous increase in the proportion of black managers in the public service. Between 1994 and 1997, this grew from 6% to 38% at national level and, from the same baseline, to 66% in provincial administrations. This rapid increase in black management in the public sector significantly reduced the pool of black candidates available for private sector posts.
Not surprisingly in these circumstances, data gathered by FSA-Contact showed that 63% of employers had experienced the ‘poaching’ of black managers by firms willing to pay significant premiums to attract them to their staff. This level of poaching – coupled with a willingness to pay black people premiums ranging from 10% to 20% above normal salaries – testified to an enormous unmet demand for black managers in the private sector, rather than a racist refusal to employ them.
The prohibition on unfair racial discrimination under the 1998 Act is binding on all employers, but the obligation to achieve demographic representivity at every level applies solely to ‘designated employers’. These are defined in the 1998 Act as employers that employ 50 people or more and/or have annual turnover exceeding specific thresholds. Under the Bill, however, the reference to turnover will fall away altogether. This is intended to reduce the regulatory burden on small employers. Thus only employers with 50 or more employees will be subject to the Minister’s new powers to set EE targets for them.
The removal of the turnover criterion is an important step forward. However, the remaining rule will give firms perverse incentives to avoid growing their workforce above the 50-employee threshold. Yet this is the opposite of what the country needs as it battles to bring down its extraordinarily high rate of unemployment – currently 31% on the official definition – to less damaging levels.
No one can tell what these numerical targets will be, as the Minister’s discretion to determine differing targets is to be largely unfettered. This discretionary power is highly problematic in itself, as it makes the relevant rules uncertain, unpredictable, and subject to rapid change. It undermines the rule of law, which requires that laws be certain and clear at all times. Moreover, since the ‘supremacy of the rule of law’ is one of the founding values of South Africa’s democracy, the Minister’s discretionary powers also put the new Section 15A in conflict with Section 1 of the Constitution.
How onerous the compliance obligation might become is impossible to tell. It is probable that the Minister’s numerical targets may be modelled, initially at least, on those in the BEE generic codes. This would make these BEE targets compulsory for all employers in the specified sectors that have 50 employees or more. Since little has been done to counter the pervasive skills deficit – and the economy has shrunk during the prolonged Covid-19 lockdown – compliance is likely to be inordinately costly and difficult for many struggling businesses to achieve.
Far from helping to ensure a better use of ‘the talents and skills of the whole population’, as the ANC promised back in 1994, EE has hobbled the economy and greatly harmed the black majority dependent on state services. It has also cemented inequality between the relatively few who benefit from it and the 9.9 million black people who are currently unemployed (on the expanded definition which includes those no longer activity looking for work). These millions of jobless people have effectively been locked out of the economy and any real prospect of upward mobility. Their plight helps explain why the poorest black South Africans have seen so little improvement in their incomes, especially when compared to the relative black ‘elite’.
According to official figures on South Africa’s income distribution, in 2015 the bottom 40% among black South Africans obtained a mere 3.7% of national income, which was very much the same as the 3.4% this group had gained in 2006. By contrast, the top 10% among blacks gained 26% of national income (up from 19% in 2006), while the remaining 50% of blacks obtained 22% of the total (up from 16% in 2006). If so-called coloureds and Indians are taken into account as well, the top 10% among black South Africans (as broadly defined) obtained 32% of national income in 2015. By contrast, the top 10% among whites gained 11% (down from 18% in 2006) – or three times less.
This decline among the white top 10% is ignored by the ANC, as it contradicts its narrative of unbroken white privilege and economic power since 1994. More serious still is the ANC’s refusal to acknowledge that EE and other transformation policies have not worked for the bottom 40% of black South Africans, whose share of national income has stagnated even as EE and other BEE policies have been ever more stringently applied.
EE has been particularly damaging in the public sector, where implementation has helped cripple both the public service and core SOEs. All South Africans have paid a heavy price for this erosion of state competence, but the damage to the poor has been particularly severe, resulting in worse service delivery by the public service and SOEs, lower economic growth, and fewer prospects of finding jobs.
EE overlooks the vital contributions that business already makes to gross fixed capital investment, employment, salaries, tax revenue and GDP. These are by far the most important inputs the private sector can make to the upward mobility of all South Africans. Yet the EE Act, with its narrow emphasis on racial targets at every level of the workforce, ignores them all.
A few statistics provide at least some insight into the extent of the business contribution. Gross fixed capital formation averaged some R616bn a year (in constant 2010 prices) from 2015 to 2019, of which business contributed some 67% – or by far the lion’s share. Whereas fixed capital investment by the government and SOEs has decreased sharply since 2015, fixed investment by the private sector has grown.
The IRR has for some years been developing an alternative approach to empowerment which would be far more effective than current EE and BEE policies in helping to liberate the poor. This alternative strategy is called Economic Empowerment for the Disadvantaged (EED) – see submission for details.
Mr Cardo welcomed the submission and asked for clarity on the effects of section 15A which gives the Minister power to determine targets. He asked if Dr Jeffery would give her view on the difference between target and quota.
Ms Denner asked why a means test would be better implemented as compared to racial quotas.
Ms Mkhonto asked how the R1.2 million for coordination costs came about. She asked what other discriminations were going to be addressed by the Bill or if it was only racial discrimination. She asked how equity for high positions rather than low positions in companies was going to be implemented without relying on the state.
The Chairperson said the submission was thought provoking and it touched on the feelings of everyone although some of the points raised in the submission were generic. She asked if SAIRR could not outline the impact of the education system since the majority of South African are products of a failed educational system and this resulted in a lack of skilled labour force. She asked if SAIRR was encouraging that the private sector, which is controlled by the white people, should be left alone and the Bill should focus on the government because that is what the submission portrayed. It would have been better if SAIRR had included the categories of young people in their submission since they are the future employees. The Committee should have all the figures so that when they are deliberating, they have all the information to assist them in coming to conclusions.
Dr Jeffery said that s15A is a difficult clause and it is not easy to make a conclusion because of the fragility of circumstances and that the section will be directly applied to businesses. In trying to apply redress there must be a careful consideration on making sure that there is no harm in the private sector especially the work experience. What is needed is an organic process that will get the economy growing accompanied with economic research. This will create jobs. Jobs must be created for everyone instead of damaging the systems that are currently in place. Businesses will end up dismissing employees and reluctant to expand.
Dr Jeffery told the Committee that due to the problems facing the country it might risk closing business doors with the Bill and it will not be a good idea because of Covid-19 job losses at the moment. The creamy layer has been applied in India and the people with the best political connections end up getting jobs instead of employing those living in townships and in need of jobs. It is a good thing to move from racial classification because the Constitution does not allow racialism.
Dr Jeffery said that she did not have insight into how the R1.2 million was arrived at. The Department can provide further insight into this figure.
There are other issues that can be focused on but SAIRR focused on race because of the history of South Africa. SAIRR promotes economic empowerment of the disadvantaged and they are trying to find a middle ground so that there can be an improvement of lives. If businesses take part, there will be growth in the country. Dr Jeffery said that she did not understand well the question of the private sector having to rely on the state.
Dr Jeffery explained that it is not a good thing to encourage dependency on the state and the voucher system will assist people and it will empower the recipients. SAIRR does have data that shows the education numbers in South Africa, especially those who drop out and who do not pass in subjects like maths and sciences – there is a need to improve this area.
She told the Committee that the private sector must not be forced into situations considering the status of the country as this will affect efficiency. SAIRR seeks to improve the lives of South Africans. She added that there is a considerable number of students dropping out of universities and it is a cause of concern.
The Chairperson suggested that SAIRR submit the breakdown of figures to the Committee because it would help them in their deliberations. She was concerned about the vouchers as she did not understand how it is a way forward because it looked like a more sophisticated grant and it would create a syndrome of dependency on the state. She asked Dr Jeffery to clarify the voucher system for housing.
Ms Mkhonto agreed with the Chairperson and said that the response from Dr Jeffery was a bit general and did not tackle the issues raised.
Dr Jeffery replied that at the moment more than R700 billion is allocated for education, healthcare and housing. Some of the money can be reallocated which means that low-income households will then get vouchers to assist them. Now there is high unemployment and low growth so jobs need to be created and expanded otherwise jobs will be phased out. For the voucher system to work everyone must be in sync. SAIRR does support the approach as it will help in addressing the social problems in the country.
The Chairperson asked which would be more empowering for the economy between the voucher system and the reskilling mechanism in the private industry. She gave the example of workers employed in the private sector and asked if it is not the responsibility of the private sector to ensure that when employees leave, they have skills.
Dr Jeffery replied that EED should be used for creating more jobs and training employees. When it comes to the voucher SAIRR is more concerned about the children who will grow up with jobs, skills and training. That is why the voucher system needs to be implemented because it will assist people in rural areas.
Commission for Gender Equality (CGE) submission
Mr Dennis Matotoka, CGE Deputy Director, said the Commission is an independent statutory body established in terms of Chapter 9 of the Constitution with a mandate to promote and protect gender equality in government, civil society and the private sector. The CGE Act gives the Commission the power to monitor and evaluate policies and practices of organs of state, statutory bodies and functionaries, public bodies and authorities and private businesses, enterprises and institutions to promote gender equality and make recommendations that the Commission deems necessary.
The Commission also has the power to evaluate any Act of Parliament, make recommendations to Parliament or any legislature on any law affecting gender equality or the status of women, and may recommend to Parliament the adoption of new legislation to promote gender equality and the status of women.
The Commission has since 2013 held transformation hearings with specific focus on the private and public sector. This process was initiated following concerns of the underrepresentation of previously disadvantaged groups in various occupational levels. In the private sector, males (mostly white males) dominated managerial positions. The Commission observed that the Employment Equity Act of 1998 did not progressively increase the representation of women and persons with disabilities at top management levels in the private sector. To this end, the Commission supports robust measures to accelerate and achieve equity in the private sector.
The Commission noted the insertion of the definition of ‘National Minimum Wage Commission'. It welcomed the inclusion and comprehensive definition of ‘people with disabilities’. This gap had resulted in the exclusion of most persons with disabilities in the workforce. It follows from the hearings of the Commission that employers often argue that employees do not disclose or declare their disabilities in the workplace. An inclusive definition supported by a diversified workplace has the prospects of encouraging employees to declare their disabilities.
CGE welcomed the inclusion of section 15A. The inclusion of sectoral targets will proliferate the representation of previous disadvantaged groups in various occupational levels. The setting of targets should consider that women and persons with disabilities have been underrepresented despite the Employment Equity Act requiring designated employers to put in place affirmative action measures to achieve equity. The sectoral targets should specifically recognise the gender dynamics in the workplace. The amendment will provide employers with the specific targets that need to be achieved. The current format of permitting employers discretion to set their own targets as per an employment equity plan, has not resulted in the proliferation of previously disadvantaged groups occupying decision-making positions, especially women and persons with disabilities.
In conclusion Mr Matotoka said that CGE broadly supports the Bill as it introduces sectoral numerical targets to ensure equitable representation of suitably qualified people from designated groups (blacks, women, and persons with disabilities) at all occupational levels in the workplace.
Ms Mkhonto asked if CGE pay more focus on persons being adequately and relevantly qualified before they push for the matter of equality because it must not be a matter of compliance but those being employed in such positions must add value.
The Chairperson asked for clarity on CGE’s interactions with companies and if they have been exposed to women who are paid less compared to their male counterparts. CGE should inform the Committee of the companies they have engaged with and not give a general perception. It is important to know before amending a law, there must be facts which will assist in the application of the ideas and consultations. There are sectors that are more female dominated, and others are white dominated. She gave an example of the dermatology sector which is dominated by white females. CGE should be clear when giving its submission and not generalise.
Mr Matotoka replied that CGE does look at the qualifications and experience of someone before they advocate for employment and they do not rely only on the gender and disability of a person. There are those with a disability and the required expertise and education, but they are overlooked. In some instances, women are overlooked because of their gender. In the private sector white males are mostly given top positions and women are overlooked.
Mr Matotoka gave examples of companies CGE had engaged with such as Associated Motor Holdings where a female employee took the company to court in 2018 and a Palaborwa mine where CGE received complaints from the female employees. CGE does do its research first before it makes its submissions.
Dr Ntabiseng Moleko, CGE Deputy Chairperson, said that a lot of research has been done on the gender wage gap and there is data to show the difference. Stats SA has the numbers for men and women on earnings according to level of education. Even when both genders do not have education, men earn more than women and the same continues to tertiary education. Irrespective of education, women will earn less. There are laws that have enacted to deal with discrimination and inequality but the practice in the workplace is different and analysis show that there are discrepancies and it is important that the Bill deals with this. The lack of transparency in organisations needs to be looked at because this important information is not shared by companies. She suggested companies should publish the information so there is transparency.
Ms Tamara Mathebula, CGE Chairperson, said that CGE looks at public and private companies that they engage with in terms of openness and transparency. When they engage with companies the purpose is to look at the impact and to determine if they are abiding by the legislation. In 2016 CGE looked at companies which included Sasol, Pick n Pay, Johnson and Johnson, Tiger Brands to mention a few. They look at the vulnerabilities of people with disabilities and women and how they experience challenges in the workplace. The private sector is aware of the legislation, but they do not implement the relevant laws. CGE does follow up on companies to ensure that they achieve gender and disability targets.
The Chairperson asked if it was possible for CGE to mention companies that have a gender wage gap because it would assist the Committee in conducting its oversight role. She asked for the investigation procedure followed by CGE and for its whistleblower policy.
Mr Matotoka replied that they do allow individuals to do walk-ins at their offices.
Dr Moleko told the Committee that recourse is a major problem and whether there are sufficient and appropriate sanctions for non-compliance. The penalties handed out are not harsh enough to stop the non-compliance by corporates and they continue not meeting the targets. There is a need for emphasis on enforcement and penalties because the legislation is already in force. CGE could potentially look at partnerships with others that investigate gender inequality in the workplace.
Mr Matthew Parks, COSATU Deputy Parliamentary Coordinator, said that COSATU welcomes and supports in full the Employment Equity Amendment Bill. It is a critical Bill that will strengthen government to achieve the progressive targets of the Employment Equity Act. The expansion of the definition of disabilities to include intellectual and sensory is correct and long overdue.
Empowerment of the Minister to set economic sectoral targets is critical as sectors are not uniform and some have made progress in achieving their targets, while others remain notorious for their failure to do so. Provisions allowing the Minister to specify targets according to occupational, regional and sub-regional need are welcomed. Particular occupational strands often remain laggards such as low skilled jobs or managerial positions.
Mr Parks said that it is important for targets to consider regional and sub-regional demographic diversity. South Africa is a diverse nation and this is often linked to geography. A blanket uniform approach does not work, and a one-size-fits-all target can cause social strife. Provisions requiring the Minister to engage when setting targets with the Employment Equity Commission will help to ensure targets are thoroughly considered beforehand. Provisions requiring employers to consult trade unions are welcomed and they will help strengthen collective bargaining and encourage labour market stability.
COSATU welcomes the provisions requiring employers to report on collective bargaining matters, compliance with the NMW Act, as well as sectoral determinations as this will help to support compliance with these progressive and statutory obligations.
COSATU supports the provisions empowering labour inspectors to enforce compliance of employers with the Employment Equity Act. These are critical to ensuring that inspectors are fully empowered and ensure that recalcitrant employers are held accountable.
COSATU welcomes provisions that state government contracts may be issued only to businesses in compliance with the Employment Equity Act. COSATU urges Parliament to prioritise and pass this Bill as soon as possible. Parliament should defend the Bill’s progressive provisions and not be convinced by calls to gut, dilute or weaken these necessary interventions. It has taken many years to reach Parliament and it should not be delayed any further.
Ms Denner asked if it was not sensible and advisable to define the powers of the Minister on the setting of targets.
Mr Cardo asked Mr Parks to comment on the matter that others seem to think that the Bill will only help a small elite group. His second question was if the Bill will not have potential mis-employment effects if implemented.
Ms Mkhonto welcomed the submission and asked about strategies for implementation of the Bill. How was COSATU going to ensure that the Bill is implemented in institutions? Ms Mkhonto was concerned about cadre deployment and favouritism that has been labelled towards COSATU. She wanted to know how they were going to tackle such issues.
The Chairperson said that SAIRR mentioned employment did take place in the private sector and they do not want the Bill to be implemented in the private sector. She had asked if SAIRR wanted the private sector to be left alone and not be subject to the Bill. She asked Mr Parks what his views were. She asked for COSATU’s view on housing vouchers. She had thought that COSATU was going to present the demographics of workers and how they will be affected by the Bill.
Mr Parks replied that the Bill is important because of the unfairness in the sectors and there is a need for a new surgical approach to deal with this in the public and private sectors especially on remuneration and management positions between the private and public sector. There are some who do not want the Bill because they want the status quo to continue. COSATU wants people to have jobs and housing accompanied with opportunities. SAIRR is condescending and in the 1980s they did not cater for the black people and they took a soft approach towards apartheid and it means a lot as to why they are against the Bill. The private sector being run by white males has had money for employees being stolen and nothing has been done. In response to Mr Cardo, he said that Bill will specify the technical details and will not have a blanket approach because the Constitution does not allow for this but the Bill is important because it brings together regional and sub regional.
The Minister will also have to consult. If there are those that feel that the Minister has abused the powers, then the courts must be approached. The class identified by the Bill is very important and the Bill does not target the elite. Most retail cashiers are black and coloured women – that means the Bill is important. It is not a new Act, but is merely correcting the current Act and it addresses important issues. With the Bill implemented, it meant that matters are not being swept under the carpet. COSATU has members at workplaces and in other federations which means they also play their roles. He was not aware of cadre deployment, but he did know that COSATU is consulted when there are positions that need to be filled.
The Chairperson thanked the stakeholders that attended the meeting. She said that the Committee will try and work around the clock to ensure the Bill is passed but they have to ensure that they close all the loopholes in the Bill and that all those who want to make submissions are accommodated.
Meeting was adjourned.
- CGE Presentation
- SAKELIGA Oral Presentation
- South Africa Institute of Race Relations Notes
- South Africa Institute of Race Relations Presentation
- PC Employment & Labour Media Statement
- COSATU Presentation
- COSATU Submission
- CGE Submission
- SAKELIGA Submission
- South Africa Institute of Race Relations Submission
Dunjwa, Ms ML
Bagraim, Mr M
Cardo, Dr MJ
Denner, Ms H
Hinana, Mr N
Makhubele-Marilele, Ms PP
Mkhonto, Ms C N
Nkabane, Dr NP
Nontsele, Mr M
Wolmarans, Mr M
Zuma, Ms AS
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