South African Institute of Race Relations
Submission to the
Department of Labour
Regarding
the Draft Employment Equity Regulations 2014
Johannesburg, 28th March 2014
Introduction
The Employment Equity Act of 1998 (the EE Act) says that the extent to which employers have complied with their racial targets must be assessed, among other things, with reference to ‘the demographic profile of the national and regional economically active population’. [Section 42, EE Act]
This wording has allowed employers to take account of regional demographics wherever these differ significantly from national ones. This has particular salience for so-called ‘coloured’ people, who make up some 51% of the economically active population (EAP) in the Western Cape but only 11% of the national EAP. It has a similar importance in the Northern Cape, where coloured people make up 40% of the EAP, against their 11% share of the national EAP. It also has particular significance for Indian people in KwaZulu-Natal, who make up 12% of the provincial EAP but only 3% of the EAP at national level. [Commission for Employment Equity, 2012-2013 Annual Report, p7]
Employment Equity Amendment Bill of 2010
The Employment Equity Amendment Bill of 2010 (the 2010 Bill) removed any reference to regional demographics, making it clear that employers would have to apply national demographics in future, to the great detriment of coloured people in the Western Cape and Northern Cape, and Indian people in KwaZulu-Natal.
The removal of any reference to regional demographics was widely criticised. Criticism grew further, moreover, when it came to light that Jimmy Manyi (director general of labour at the time the 2010 Bill was drafted) had earlier said that coloured people were ‘over-concentrated’ in the Western Cape and should move elsewhere in the country if they wanted to find work. [Mail & Guardian 24 February 2011]
In response, Trevor Manuel, minister in the presidency: national planning commission, penned an open letter to Mr Manyi accusing him of ‘worst-order racism…in the mould of H F Verwoerd.’ Mr Manuel added that ‘provisions for redress…can never be an excuse to perpetuate racism’, and suggested that Mr Manyi’s racism, as reflected in the 2010 Bill he had helped to draft, had now ‘infiltrated the highest echelons of Government’. The African National Congress (ANC) also repudiated Mr Manyi for this statement, prompting a retraction by him. [The Star 2 Mar 2011; www.iol.co.za, accessed 2 March 2011]
Employment Equity Amendment Bill of 2012
The 2010 Bill was in time replaced by the Employment Equity Amendment Bill of 2012 (the 2012 Bill). Unlike its 2010 predecessor, the 2012 Bill retained the current provision in the EE Act which entitles employers to take account of both national and regional demographics. This change, which suggested that the Government had reconsidered its earlier attempt to delete any reference to regional demographics, was widely welcomed.
However, under the 2012 Bill, the minister of labour was also empowered, ‘after consultation’ with the Government, business, and labour at the National Economic Development and Labour Council (Nedlac), to issue regulations specifying the circumstances in which either national or regional demographics were to be taken into account. This wording suggested that the use of regional demographics might in future be constrained at ministerial behest, and without sufficient regard for the views of either Parliament or Nedlac.
Employment Equity Amendment Act of 2013
The Employment Equity Amendment Act of 2013 (the EE Amendment Act), signed into law by President Jacob Zuma in January 2014, has the same wording on the issue of national and regional demographics as the 2012 Bill. It is under the power thus conferred on the minister of labour, Mildred Oliphant, that the draft regulations here in issue were gazetted in February 2014. [Draft Employment Equity Regulations 2014, Government Gazette no 37338, 28 February 2014]
Draft Employment Equity Regulations of 2014
According to these draft regulations, larger employers (those with 150 employees or more) must use national demographics ‘as a guide’ in setting racial targets for top and senior managers, along with professionally qualified employees. Targets for ‘skilled technical’, semi-skilled and unskilled workers must be based on the average of the regional and national profiles. For designated employers with 149 employees or less, national demographics are to be used for top and senior management, and regional demographics elsewhere. [Clause 3, Draft Employment Equity Regulations 2014]
Impact of the draft regulations on ‘coloured’ people
The draft regulations will severely prejudice coloured people in the Western Cape who, as noted, make up 51% of the economically active population (EAP) in the province but only 11% of the national EAP. If the target for coloured representation at senior and professional levels may not exceed 11%, then coloured people may often find themselves in ‘over-supply’ in such posts. Among larger employers of 150 people or more, coloured people are also likely to find themselves over-represented even at technically skilled, semi-skilled and unskilled levels as the average of national and regional demographics yields a target of 31% for coloured representation. This is inconsistent with the coloured share of the population in the Western Cape.
On this basis, about a million coloured people in the province may effectively find themselves barred from employment or promotion. [Timeslive 3 May 2013] These people will also find themselves under pressure to move from the Western Cape to other parts of the country if they want jobs – which is precisely what Mr Manyi had earlier suggested. Hence, though the ANC in 2011 repudiated Mr Manyi’s statement, it has now effectively endorsed his view. In addition, despite its well-merited strictures against the forced removals of the apartheid era, the ANC has now also implicitly endorsed the notion that people can be uprooted and compelled to move away from their homes because of the colour of their skins.
That the Government supports this notion has also been confirmed in a recent court case. This arose after the Department of Correctional Services in the Western Cape refused to appoint or promote a number of coloured people because its 9% coloured target, based on national demographics, had already been exceeded. The department’s employment equity plan added that coloured men were ‘grossly over-represented’ (as were whites), and stressed the need to accelerate the ‘down management…of our coloured colleagues’. [The Times 17 May, Business Day 22 August 2012, 26 April 2013, The Star 26 April, The New Age 6 May 2013]
In 2013 nine coloured employees challenged the validity of the department’s refusal to promote them, saying this contradicted both the Constitution and the EE Act. In the apartheid era they had been too black to warrant promotion, but now ‘they were classified as coloured’ and barred from promotion for that reason. In response, the Department argued, in a replay of Mr Manyi’s words, that there was an over-supply of coloured people in the Western Cape – and that their remedy was to move to other provinces where the coloured share of the EAP was below the coloured share of the national EAP. [The Times 17 May, Business Day 22 August 2012, 26 April 2013, The Star 26 April, The New Age 6 May 2013; Briefing by Dirk Hermann, Solidarity, 24 March 2014]
However, in October 2013 the Labour Court in Cape Town ruled in favour of the nine coloured employees, finding that all of them had suffered unfair discrimination. Judge Hilary Rabkin-Naicker ordered the department to ensure that both national and regional demographics were taken into account in future in deciding on employment equity targets. [Business Day, The Star 21 October, Business Report 23 October, The New Age 29 October 2013] The draft regulations conflict with this judgment, and clearly seek to override it by severely circumscribing the extent to which regional demographics may be taken into account.
This is unfair to coloured people. The draft regulations effectively send a message to them (to cite the words of the leader of the Democratic Alliance, Helen Zille): ‘No matter how hard you work, no matter how much value you add, you are doomed by your colour. You cannot rise above a certain level because of your race. Demography is Destiny.’ [Helen Zille, ‘The Revenge of a “Worst Order” Racist’, SA Today, 17 March 2014]
Impact of the draft regulations on Indian people
The draft regulations will also harm Indians in KwaZulu-Natal who, as noted, make up 12% of the provincial EAP but only 3% of the national one. Indians throughout South Africa may also battle to find management and professional posts, as they already hold more of these (9.5% at senior management level, for example) [2013 South Africa Survey, p254] than their share of national demographics would allow – and may thus be ‘over-represented’ in many state entities and private firms.
The extent to which Indian people are already being barred from promotions to senior posts in the South African Police Service (SAPS) – and perhaps in other government departments as well – was brought to the fore in 2012, in litigation before the Labour Court in Johannesburg. The case was brought by Jennila Naidoo, an Indian woman with 24 years’ experience in the police, whom the SAPS had refused to appoint to the post of cluster commander in Krugersdorp (Gauteng). Instead, this ‘level 14’ post had gone to an African male with an assessment score below that of Ms Naidoo. [Business Report 6 August 2013]
When the matter came to court, the SAPS explained that its employment equity plan was based on the 2001 census, which showed that the population was 79% African, 9.6% white, 8.3% coloured, and 2.5% Indian. Its target for Indian representation was thus 2.5%, while its target for women was 30%. Since there were 19 positions to be filled at level 14, ‘the calculation for Indian females was 19 x 2.5% = 0.5 positions to be filled by Indians, then 0.5 positions x 30% [the female target] which equals 0.1 Indian females and that is rounded off to zero’. The ‘ideal’ position for the SAPS was thus to have no Indian women at all at level 14 – and that was why Ms Naidoo could not be appointed. [Business Report 6 August 2013; Naidoo v The Minister of Safety and Security and another, Labour Court of South Africa, Case No JS 566/2011, 15 February 2013, para 137]
The Labour Court disagreed. Handing down his ruling in February 2013, Acting Judge Salim Shaik said the effect of the police employment equity plan was to deny Indians (and particularly Indian women) any representation at this senior level. It thus created ‘new de facto barriers to employment’ and resulted in discrimination on the grounds of both race and gender. This was contrary to the Constitution and the EE Act, which called for ‘equitable’ representation and a ‘contextualised approach’, rather than a ‘formulaic, mechanistic approach’. [Naidoo v The Minister of Safety and Security and another, paras 117, 125, 151, 158, 165]
If the draft regulations are adopted, the rules thus laid down – especially when read in the context of the penalties introduced in the EE Amendment Act (see below) – are likely to become a major ‘de facto barrier’ to the employment of Indian people in senior and professionally qualified jobs. Yet this, as the Labour Court stressed, is contrary to both the Constitution and the EE Act.
Impact of the draft regulations on employers
The draft regulations will also place a significant burden on employers. Those in the Western Cape, in particular, are likely to find that their coloured employees are ‘over-represented’ against national demographics, as well as the 31% average of national and regional demographics, where this applies. Employers with ‘excess’ numbers of coloured employees will face the dilemma of needing to reduce their coloured staff on the one hand, while wanting to avoid penalties for unfair dismissals on the other.
All employers in the province will also be aware that every coloured person they take on will make it harder still to meet their EE targets. They will also come under pressure to bring African representation at senior levels up to 75%, this being the African share of the EAP at national level. However, the African share of the EAP in the Western Cape is currently 34%, raising questions as to how this 75% target can possibly be met.
Yet employers who fail to meet this unrealistic goal will face draconian new penalties under the EE Amendment Act. In particular, they will be subject to maximum fines of R1.5m or 2% of annual turnover, whichever is the larger, for their first failure to meet racial targets. For a fifth similar offence within three years – and such ‘offences’ may be hard to avoid, given the racial make-up of the provincial population in the Western Cape – the new fines will go as high as R2.7m, or 10% of annual turnover, whichever is the larger amount.
Since few businesses have profits amounting to 10% of annual turnover, such fines, as a regulatory impact analysis (RIA) commissioned by the Department of Labour in 2010 has warned, will be high enough to close down many firms. This, as the RIA also cautioned, will damage the economy and push more people out of jobs.
In addition, all employers in all parts of the country may effectively be barred from using Indian skills in professional and management posts. Yet these skills are important to the country, for in 2012 more than 62% of Indians had completed Grade 12, compared to 33% of Africans. In addition, some 12% of Indians had completed post-school education, compared to 4% of Africans. [2013 South Africa Survey, p470]
Given the massive skills deficit within South Africa, it makes no sense at all to bar the use of some of these scarce skills simply because of the ‘race’ of those who hold them. If these skills are indeed not to be used, this will further undermine the capacity of the public service, while reducing the efficiency and competitiveness of the private sector.
Conclusion
The founding provisions of the Constitution clearly identify ‘non-racialism’ as a core value of our democracy. They also stress the ‘supremacy of the Constitution’, while adding: ‘The Constitution is the supreme law of the Republic; law or conduct inconsistent with it is invalid, and the obligations imposed by it must be fulfilled’. [Sections 1, 2, Constitution]
The draft regulations are in conflict with the founding value of non-racialism, from which no derogation is permitted. This means they are invalid – and that the Government is constitutionally obliged not to proceed with them.
(The same objection applies, of course, to the EE Act itself, which requires that all South Africans be classified by ‘race’ and then accorded differential treatment according to their ‘race’. The Act is equally in conflict with the founding values of the Constitution and should also be struck down for this reason. For present purposes, however, the focus must fall on the unconstitutionality of the draft regulations themselves.)
In addition, the regulations make no economic sense. By constraining the use of scarce skills on spurious racial grounds, they will undermine public service capacity and private sector competitiveness. They will also compound the difficulty of complying with the EE Amendment Act for all designated employers in both the public and private sectors. This will increase the prospect of firms being fined into bankruptcy under the new penalties being introduced.
Overall, the draft regulations will help increase the burden of the EE Act on businesses to levels that are intolerable. This in turn will choke off investment, reduce growth, and worsen unemployment.
This means that the draft regulations are also in conflict with the goals of the National Development Plan (NDP), adopted by the Cabinet in August 2012 and by the ANC at its Mangaung (Bloemfontein) national conference in December 2012. Since the NDP seeks to raise the annual rate of economic growth to 5.4% of GDP and to stimulate 11m new jobs by 2030, any regulations which make these goals more difficult to achieve are intrinsically at odds with it. In addition, the NDP has repeatedly been recognised by the Government and the ruling party as South Africa’s ‘over-riding policy blueprint’ from now until 2030. This too provides good reason for the draft regulations to be withdrawn in their entirety.
South African Institute of Race Relations NPC – 28th March 2014
