Research and Policy Brief: The Democratic Alliance and the Employment Equity Bill - 5th November 2013.

The Democratic Alliance has thrown its weight behind the Employment Equity Amendment Bill of 2012. This has five specific implications for the country, the Western Cape, and the party itself.
Click here to sign up
Join the conversation
You are here: Home Reports & Publications Research & Policy Brief Research and Policy Brief: The Democratic Alliance and the Employment Equity Bill - 5th November 2013.

Research and Policy Brief: The Democratic Alliance and the Employment Equity Bill - 5th November 2013.

The Democratic Alliance has thrown its weight behind the Employment Equity Amendment Bill of 2012. This has five specific implications for the country, the Western Cape, and the party itself.

Firstly: The Employment Equity Amendment Bill of 2012 (the Bill) retains current provisions in the Employment Equity Act of 1998 (the Act) which allow designated employers, in setting their racial targets, to take into account ‘the demographic profile of the national and regional economically active population’. However, the Bill also empowers the minister of labour to issue a regulation ‘specifying the circumstances’ in which employers must take into account either national or regional demographics.

This gives the minister significant power to limit reference to national demographics – and without having to bring the matter before Parliament for endorsement. Instead, the minister will merely have to ‘consult with’ the National Economic Development and Labour Council (Nedlac), but will not have to take account of Nedlac’s views.

This could have the effect of undoing the recent Labour Court judgment in the case of Solidarity v Department of Correctional Services. Here, the court found the department had erred in refusing to appoint or promote a number of coloured people because its 9% coloured quota, based on national demographics, had been exceeded. It ordered the department to ensure that both national and regional demographics were taken into account.  The Bill is thus directly hostile to the interests of coloured people in the Western Cape and also to those of Indians in KwaZulu-Natal.

Secondly: The minister is also empowered – again, after consulting Nedlac, but without being bound by its views – to issue further regulations stipulating the basis on which a designated employer’s compliance with the Act is to be assessed. This is a broad-ranging power.

The Bill thus forms part of a growing body of legislation which allows ministers large scope to lay down new rules by way of regulation. A significant part of law-making is shifting from Cape Town to Pretoria – and occurring without parliamentary oversight. 

Third: The Bill is ostensibly supposed to increase demand for black people in management posts, but this demand is already so high that skilled black people commonly command salary premiums of between 10% and 30% over their white counterparts.

Larger firms may increase their efforts to poach skills from elsewhere, and also to fast-track the promotion of promising black employees. However, there is a limit to what they can achieve so long as the skills shortage remains so acute. If businesses are constantly coerced to appoint unqualified people to key positions, there is no reason to suppose that they will fare any better than our failed municipalities and government departments.

If the Bill has any benefits, these will go to a relative elite within the black population – those young black people fortunate enough to have received good schooling (often at former ‘Model C’ schools) and good tertiary training. However, such people are already in such demand that it is questionable how much more the Bill will help them.

Unfortunately, the Bill will bring no benefits to the truly disadvantaged – the unemployed and unskilled, many of whom have dropped out of school without even a matric – who have no prospect of ever being appointed to management jobs.

This dichotomy reflects a growing problem in policy-making by the ANC and the DA. Racial empowerment policies are being adopted in the name of the poor majority but are in fact directed at a small black elite. The more this continues, the more we can expect violent anti-government and anti-business demonstrations from poor communities for whom such policies offer no hope of a better future.  

While the Bill might perhaps increase employment ‘equity’ for the few, it will do little to advance greater economic inclusivity. On balance, when the costs and uncertainties it adds to business are taken into account, the Bill is likely to retard economic progress and investment in South Africa.  

Fourth:  The amendments are likely to have many negative consequences for the economy and the country as a whole. To take but one example, under the Bill the maximum fine for a first ‘offence’ in failing to fulfil a racial quota will be R1.5m (up from R500 000) or 2% of annual turnover, whichever is the higher. The maximum fine for a fifth such offence within three years will be R2.7m (up from R900 000) or 10% of annual turnover, whichever is the higher. Annual turnover is, of course, very different from annual profit.

Ironically, the Government’s own regulatory analysis of the Bill warned that such fines are high enough to push many firms out of business. This will worsen the crisis of unemployment and further reduce the economic growth which offers the only sure path out of poverty. This underscores the high price the country will pay for ANC/DA willingness to pander to the demands of a relatively small elite.

Fifth:  The DA is clearly hoping its endorsement of the Bill will win it the support of ‘born-free’ black South Africans in the 2014 general election. However, skilled black youths within this group have little need of this artificial leg-up and would benefit far more from measures to boost economic growth and the generation of new jobs. At the same time, in retarding growth and investment, the Bill will ultimately harm the poor black majority, who far outnumber the black elite.

DA support for this kind of racial engineering will come as a shock to many of its current supporters. It also betrays the non-racial principles for which the party has historically stood.  But the DA’s conduct is primarily a betrayal of the poor, who need sound alternatives to the ANC’s failed empowerment policies, which have done little to assist them beyond welfare and free services.

It is now apparent that the truly disadvantaged cannot look to the official opposition to provide those alternatives. This means there is no major political actor in South Africa representing their interests in this regard – a truly extraordinary situation. It remains to be seen whether any other opposition parties will seek to capitalise on this. However, this might be unlikely, as the growing ANC/DA consensus on racial engineering comes to dominate policy thinking in South Africa.

 

Anthea Jeffery and Frans Cronje

Drs Jeffery and Cronje work for the South African Institute of Race Relations.

This article was first published in the Sunday Argus on 3rd November 2013.

IRR TV

Firstly: The Employment Equity Amendment Bill of 2012 (the Bill) retains current provisions in the Employment Equity Act of 1998 (the Act) which allow designated employers, in setting their racial targets, to take into account ‘the demographic profile of the national and regional economically active population’. However, the Bill also empowers the minister of labour to issue a regulation ‘specifying the circumstances’ in which employers must take into account either national or regional demographics.

This gives the minister significant power to limit reference to national demographics – and without having to bring the matter before Parliament for endorsement. Instead, the minister will merely have to ‘consult with’ the National Economic Development and Labour Council (Nedlac), but will not have to take account of Nedlac’s views.

This could have the effect of undoing the recent Labour Court judgment in the case of Solidarity v Department of Correctional Services. Here, the court found the department had erred in refusing to appoint or promote a number of coloured people because its 9% coloured quota, based on national demographics, had been exceeded. It ordered the department to ensure that both national and regional demographics were taken into account.  The Bill is thus directly hostile to the interests of coloured people in the Western Cape and also to those of Indians in KwaZulu-Natal.

Secondly: The minister is also empowered – again, after consulting Nedlac, but without being bound by its views – to issue further regulations stipulating the basis on which a designated employer’s compliance with the Act is to be assessed. This is a broad-ranging power.

The Bill thus forms part of a growing body of legislation which allows ministers large scope to lay down new rules by way of regulation. A significant part of law-making is shifting from Cape Town to Pretoria – and occurring without parliamentary oversight. 

Third: The Bill is ostensibly supposed to increase demand for black people in management posts, but this demand is already so high that skilled black people commonly command salary premiums of between 10% and 30% over their white counterparts.

Larger firms may increase their efforts to poach skills from elsewhere, and also to fast-track the promotion of promising black employees. However, there is a limit to what they can achieve so long as the skills shortage remains so acute. If businesses are constantly coerced to appoint unqualified people to key positions, there is no reason to suppose that they will fare any better than our failed municipalities and government departments.

If the Bill has any benefits, these will go to a relative elite within the black population – those young black people fortunate enough to have received good schooling (often at former ‘Model C’ schools) and good tertiary training. However, such people are already in such demand that it is questionable how much more the Bill will help them.

Unfortunately, the Bill will bring no benefits to the truly disadvantaged – the unemployed and unskilled, many of whom have dropped out of school without even a matric – who have no prospect of ever being appointed to management jobs.

This dichotomy reflects a growing problem in policy-making by the ANC and the DA. Racial empowerment policies are being adopted in the name of the poor majority but are in fact directed at a small black elite. The more this continues, the more we can expect violent anti-government and anti-business demonstrations from poor communities for whom such policies offer no hope of a better future.  

While the Bill might perhaps increase employment ‘equity’ for the few, it will do little to advance greater economic inclusivity. On balance, when the costs and uncertainties it adds to business are taken into account, the Bill is likely to retard economic progress and investment in South Africa.  

Fourth:  The amendments are likely to have many negative consequences for the economy and the country as a whole. To take but one example, under the Bill the maximum fine for a first ‘offence’ in failing to fulfil a racial quota will be R1.5m (up from R500 000) or 2% of annual turnover, whichever is the higher. The maximum fine for a fifth such offence within three years will be R2.7m (up from R900 000) or 10% of annual turnover, whichever is the higher. Annual turnover is, of course, very different from annual profit.

Ironically, the Government’s own regulatory analysis of the Bill warned that such fines are high enough to push many firms out of business. This will worsen the crisis of unemployment and further reduce the economic growth which offers the only sure path out of poverty. This underscores the high price the country will pay for ANC/DA willingness to pander to the demands of a relatively small elite.

Fifth:  The DA is clearly hoping its endorsement of the Bill will win it the support of ‘born-free’ black South Africans in the 2014 general election. However, skilled black youths within this group have little need of this artificial leg-up and would benefit far more from measures to boost economic growth and the generation of new jobs. At the same time, in retarding growth and investment, the Bill will ultimately harm the poor black majority, who far outnumber the black elite.

DA support for this kind of racial engineering will come as a shock to many of its current supporters. It also betrays the non-racial principles for which the party has historically stood.  But the DA’s conduct is primarily a betrayal of the poor, who need sound alternatives to the ANC’s failed empowerment policies, which have done little to assist them beyond welfare and free services.

It is now apparent that the truly disadvantaged cannot look to the official opposition to provide those alternatives. This means there is no major political actor in South Africa representing their interests in this regard – a truly extraordinary situation. It remains to be seen whether any other opposition parties will seek to capitalise on this. However, this might be unlikely, as the growing ANC/DA consensus on racial engineering comes to dominate policy thinking in South Africa.

 

Anthea Jeffery and Frans Cronje

Drs Jeffery and Cronje work for the South African Institute of Race Relations.

This article was first published in the Sunday Argus on 3rd November 2013.

Free Society Project