Employment Equity Act — yet another act of absurd South African self-harm looms

South Africa is astonishingly creative at fashioning its own political, social and economic demise. Most similarly sized “emerging” economies facilitate their own respective Götterdämmerungs in far more facile ways. Installing some pliant sycophant in the central bank who promptly debases the currency and creates tearaway inflation is a tried and trusted strategy. Alternatively, a coup d’état by a group of gung-ho generals has been used with unparalleled effectiveness throughout Africa and the Global South.

South Africa, however, likes to do things its own way, taking the path less travelled to complete and utter bedlam.

Take the last four months as an example. From Phala Phala and Sofagate, via rolling blackouts and mysterious nocturnal interludes with the Lady R, South Africa has been outdoing itself on the self-harm stakes. And yet, it is now becoming apparent that these may well be mere harbingers of the cataclysm to come which is the amended Employment Equity Act.

Signed into law by President Cyril Ramaphosa on 14 April 2023, the first set of regulations to give effect to the amended Act was published for 30 days of public comment on 12 May. Without drifting into hyperbole, in their current state the regulations represent an unprecedented act of economic suicide.

Self-evidently, South Africa’s labour market is not working. Unemployment of 32.9% is among the highest in the world. Inequality is consistently the highest in the world, while despite a growing population the number of employed people has been flat for five years.

And so to help this pitiful state of affairs the Department of Employment and Labour — an Orwellian misnomer if ever there was one — has decided to add a set of racial and gender-based employment criteria that are so appallingly labyrinthine in complexity, so absurdly and patently unworkable in practice, that they make the Gosplan of the USSR look avowedly neoliberal.

Not only do the new regulations apply strict percentage-based criteria on the share of employees that have to be various genders, as well as African, Indian, coloured or white, they do so for specific sectors of the economy and regions. For example, for agriculture businesses in the Western Cape, 0.2% of senior management must be male Indians, while 27.6% of skilled employees must be female Africans and 14.8% coloured females.

Furthermore, these regulations will be mandatory for all businesses employing more than 50 people, and any failure to submit or implement the plan will result in a fine of up to 10% of the company’s turnover or R2.7-million, whichever is greater.

On closer inspection, thankfully there is some discretion left to the employers. For example, the totals of many targets in the exhaustive tables do not add up to 100%. However, in the skilled and professional sections, particularly as they pertain to the Western Cape, there is suspiciously little room for any discretion. This implies some broader (admittedly perverse and potentially malevolent) method behind this madness.

While it can (and will) be argued that the objectives are laudable, insofar as they pertain to redistribution and correcting the inequalities of the past, it is hard to know where to begin on the problems.

First, labour markets are essentially dynamic and fluid constructs. As it stands, South Africa’s labour market is already far too regulated and rigid for the scale of the unemployment crisis and the average level of human capital. Adding such enormously onerous directives as outlined in these regulations will increase the costs of running businesses and employing people, thereby exacerbating unemployment.

Second, reintroducing categories based on racial categories such as African, coloured and Indian would be socially cataclysmic. If signed into law, it would be the first time since the repeal of the Population Registration Act in 1991. Will employers have to resort to the “pencil test” to ensure their “targets” are being met?

Finally, the regional implications are equally disastrous. The constant movement of people between provinces has been a fundamental feature of the post-apartheid era, and an essential prerequisite for even a semi-functioning labour market. Racial and gender-based employment targets will be a disincentive for South Africans from certain population groups to move to areas where possible work for their expertise may exist, compounding regional shortages and entrenching existing racial patterns. Coloured and Indian South Africans will be particularly adversely affected as the targeted allocations for these groupings are small except in a few regions.

Ramaphosa is often accused of being a preternaturally absent president who does nothing except appoint endless committees to deliberate what can be done. On almost all dossiers of actual importance and urgency — foreign affairs, corruption, South Africa’s failing SOEs and the power crisis — he has been conspicuous by his absence.

However, and most remarkably, in the one part of the economy that really just needs the state to do nothing and exit the space altogether — making space for business to create employment opportunities in a free market wherever it can — his administration risks being self-destructively and calamitously interventionist.

For the moment, the new regulations are open to public comment and deliberations until June 12. As the amended Act has already been signed into law, Minister Thulas Nxesi has full discretion on the regulations, and there is no guarantee he will change them. All South Africans — be they employers, employees or unemployed — should be praying that something happens between now and the Act coming into force.

Deflecting criticism with the clichéd excuse of “the road to hell is paved with good intentions” is dubious. Some agenda of malfeasance seems to be at work. Perhaps the ANC’s eye is already on deals to be done in 2024. Either way, if these regulations are not heavily amended, great damage to an already crippled economy is sure to be done. DM