The employment equity amendment is (predictably) misplaced - Daily Maverick

Feb 25, 2020
25 February 2020 - Amendments to the Employment Equity Act will hand powers to the minister of employment and labour to set employment equity targets. This will, the government hopes, remedy the dearth of ‘transformation’ in the private sector.

Terence Corrigan

Amendments to the Employment Equity Act will hand powers to the minister of employment and labour to set employment equity targets. This will, the government hopes, remedy the dearth of ‘transformation’ in the private sector. 

Call these “targets” or “quotas”, the implications are clear: business will find its operations under increasing scrutiny with escalating penalties for failing to comply. This is its intent. 

In 2019, Minister of Employment and Labour Thulas Nxesi put it bluntly: “We are going to be very hard on employers. We know some people will ask questions like ‘why do we only begin being hard on employers when it is a time of crisis?’ … The reason that we focus on employment equity is because we need to address the inequality which is deeply rooted and all statistics show that as SA, we are doing very badly.”

The context was the release of the Commission for Employment Equity’s report for 2018/19. White people (and particularly white males) are disproportionately “represented” in the upper echelons of the economy – holding around two-thirds of positions in “top management”.

Such matters call out, the report says, for “drastic measures”, which seems to be what Nxesi and the pending legislation have in mind.

Nxesi is correct in pointing to the “deeply rooted” nature of South Africa’s malaise and the extent of inequality. What is less apparent is whether being “very hard on employers” and expanding his discretion are a productive way forward.

A striking feature of the report is that despite the voluminous amount of data on the composition of the workforce and meticulous breakdown (much of it not entirely unfamiliar to apartheid thinkers), there is hardly any sense of what has produced this state of affairs. 

The official reaction seems to be a notion that this is all about businesses “resisting transformation”. This is by no means self-evident.

If the intention is to address inequality, it is difficult to see what employment equity has to offer, even if it were to be flawlessly executed.

Policies of racial or ethnic preference have a chequered record internationally. It invariably serves to open opportunities up to those who are most able to seize them: the educated, relatively well-off and politically connected. In societal terms, those who need it least.

In any event, whatever prospects such plans may have, they are dependent on the state of the broader economy. One of the most aggressive of such initiatives, in Malaysia, was underwritten by growth rates that South Africa can only dream of, exceeding 5% per year for most of the period since the 1970s, and at times holding above 9% – even though the success or otherwise of its preferencing regime is hotly debated, and subject to a great deal of informed criticism.

South Africa has seen anaemic growth over the past decade and has nothing much more positive to look forward to in the foreseeable future. The South African Revenue Service says that about half of South African companies reported no taxable income and more than a quarter an actual loss. This is an economy wheezing along and the conduct of the government has, if anything, been a contributing factor to this.

For the government to demand ever more intrusive measures is an exercise in self-delusion, if not self-destruction. The drift of policy on employment equity has already been towards more punitive measures, with fines proposed of an order to cripple, if not shut down transgressors, a carrots-and-sticks approach that favours the stick over the carrot. As one of my associates has put it: “Harsh punishment, however, cannot resolve the inherent flaws in the government’s approach to employment equity. Carrots and sticks only work if the horse is alive.”

Like much of the country’s economic policy, employment equity reflects an obsession with state control and what Intellidex analyst Peter Attard Montalto has described as “countability”. The latter is the misplaced belief that by recording some activity here and investment there, the county will achieve the sort of development it needs. 

In reality, what South Africa needs is boundless optimism to invest and do business. With 30% unemployment and millions lacking this most basic opportunity to enter the economy, this needs to be the guiding thinking behind economic policy.

What is happening pushes in the other direction. Reports that government inspectors have reprimanded a Gauteng confectionary business for employing too many black women (apparently there are concerns about the failure to employ enough black men), highlights the absurdities of the current situation. The amendments under consideration will make this worse.

Being “very hard” on employers may well satisfy government ministers. Economic exclusion and inequality will be the real winners. 

Terence Corrigan is a project manager at the Institute of Race Relations

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