Letter: Havoc of quota fines - Business Day, 26th July 2012

Helen Suzman was right in saying in 1998 that the Employment Equity Act was premature at best — and that the government must first fix the skills shortage among black South Africans. Tragically, that has still to be done. This leaves employers seeking to fulfil their quotas little choice but to take on people who lack experience and competence but have (as the Employment Equity Act states) the "capacity to acquire, within a reasonable time, the ability to do the job".

The authors of the Employment Equity Act of 1998 were, of course, careful to use the word "numerical goals" rather than "quotas" (No quotas in equity act, Letters, July 24). But in practice it is quotas that are applied.

The difference in the words is anything but semantic. "Numerical goals" are often voluntarily agreed by business to set objectives and guide activities. They can always be adjusted and there are no penalties for failing to fulfil numerical goals.

Quotas are externally imposed — via legislation, for example — and the failure to fulfil them is punishable and subject to sanctions of various kinds.

In the case of the Employment Equity Act, employers are required to attain demographic representivity at every level from top management down — and punishment starts with a fine of up to R500000 for a first "contravention" of this obligation.

Once the act is amended, fines are likely (if the wording of the 2010 bill is followed) to begin at 2% of turnover, rising to 10% of turnover for a fifth such "contravention" within three years.

Professor Paul Benjamin played a major part in a regulatory impact review of the Employment Equity Amendment Bill of 2010 (and of three other labour bills). This review warned that fines of this magnitude could result in "company contraction and retrenchments, and even company closure, resulting in job losses and negative impacts on economic growth".

Equipped as he is with this insight, Prof Benjamin would do better to publicise this warning than try and deflect attention from the many adverse consequences of the existing act and the planned amendments to it.

Helen Suzman was right in saying in 1998 that the Employment Equity Act was premature at best — and that the government must first fix the skills shortage among black South Africans. Tragically, that has still to be done. This leaves employers seeking to fulfil their quotas little choice but to take on people who lack experience and competence but have (as the Employment Equity Act states) the "capacity to acquire, within a reasonable time, the ability to do the job".

Contrary to what Prof Benjamin says, this means that employers often do have to take on people "regardless of whether they have the qualifications for the job". This process is most advanced in the public sector, where (as the auditor-general now reports) officials in key positions in some 70% of local councils are "incompetent" in applying essential financial controls.

- Dr Anthea Jeffery, Head of Special Research

 

To read the letter on the Business Day website please click here.

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