Transformation is Dr Cyril’s miracle cure that if ingested in sufficient quantities was supposed to eliminate all debilitating effects of apartheid. Instead, it is about to finish off the patient.
The gazetting last week of the Department of Employment & Labour’s numerical employment targets, which form part of the Employment Equity Amendment Act (EEAA), was long anticipated and much dreaded by South Africa’s increasingly beleaguered minorities. It turns out that they’re even more draconian and destructive than was feared.
The complex matrix of requirements across 18 economic sectors affecting any employer of 50 or more people has to be incrementally implemented over a punishing five-year schedule. It effectively condemns hundreds of thousands of whites to being surplus to the requirements of a desperately skills-short South African economy. It will also, to a lesser extent, affect Indians and coloureds who, despite being ‘designated’ groups that are supposed to benefit from these measures may be demographically ‘over-represented’ in some employment categories.
This is social engineering writ large and calculated to the decimal point. For example, whites are an estimated 8.7% of the economically active national population. This determines the degree to which they are deemed employable under the EEAA regulations.
So, in 12 of the 18 sectors, white males (WMs) will not be allowed to exceed an average of about 4.5% in the ‘skilled technical’ category. These are among the most critical and highest-skilled areas of the economy, including finance, technology and science. The exceptions are mining, manufacturing and real estate, where WMs must not exceed 44%. At no level of public service employment are WMs allowed to exceed 4.1%, except at the top management level where they can reach 8.3%.
In the ‘professionally qualified and middle-management’ category, by 2030, WMs must be no more than 4.1% of the economy in six sectors, about 24% in five, and a maximum of around 45% in the remaining. At senior management levels across the productive (non-state) economy, the limits for WMs average about 25% in six sectors, about 35% in five, and about 45% in five. In water, sewerage and waste management it’s 9.5%. At the top management level, the average upper limits for WMs are below 15% in two sectors, between 25%-35% in six, about 45% in ten, and a dizzying 66.6% in one — agriculture. Since the calculations incorporate foreign nationals of all hues when calculating these apportionments, WMs will in many cases have lower participation limits than their demographic ‘stake’ (of 4.1%) would theoretically entitle them to.
The limits for white females are much the same as for their male counterparts. Indians and coloureds will be affected by the EEAA regulations proportionately to their percentage of the national population.
Failure to comply, whether it’s through defiance, an inability to find the right skills in the right hues in the right category, or inadvertently failing to comply with the whimsical rulings of anonymous, unaccountable and unsympathetic bureaucrats, can be punished severely. A first offender can be fined up to R1.5 million or 2% of turnover. Four contraventions over three years — not difficult given the mind-numbing complexity of the race/gender/age/disability matrix that the EEA sets out — the penalties can rise to R2.7 million or 10% of turnover.
The result will not be the transformation and empowerment imagined by the government and the Black Business Forum. Apart from adding to the economic deadweight of surly form-fillers and officious inspectors, the only employment boost will be to the lawyers, accountants and consultants required to help companies implement B-BEE regulations, as well as inevitably circumvent them.
The end result will be wholesale destruction of jobs, with the DA estimating that 600,000 jobs will be lost. Foreign companies will slowly divest or at least put expansion on hold. Cape Town labour lawyer and former shadow Minister of Labour, Michael Bagraim, tells me that he has already been told by half a dozen international companies, each employing on average around 100 people, that they would ‘rather shut shop’ than comply with the regulations.
Especially concerned will be the more than 600 United States companies employing over 200,000 people, operating in South Africa. The bulk of them are mid-level concerns that lack the political and financial heft of the giant multinationals to swallow the costs of compliance and ride out the legal and reputational storms they will face back home.
The Trump administration’s legal onslaught on Diversity Equity and Inclusion (DEI) regulations puts them in a dilemma. The Trump view is that DEI in the context of race or gender-based hiring and firing amounts to discrimination based on race or gender. This, goes the argument, is illegal in that it contravenes the Civil Rights Act, and unconstitutional in that it flouts the 14th Amendment.
The matter is yet to be fully tested at the US Supreme Court level and in SA, as well, the EEAA regulations face legal challenges that will go all the way to the Constitutional Court before they can be fully implemented. However, it’s not just a matter of businesses riding out a legal storm. For US companies and, to a lesser extent British and European Union ones, there are also significant reputational risks as the international political axis tilts towards the conservative.
Some, indeed many companies, may decide that in a deteriorating South African economic environment, the game is no longer worth the candle. At the very least, the EEAA will be a disincentive to new business investment.
The euphoria over the cancellation of the VAT hike shouldn’t distract from the fact that our public finances are ailing and that the prognosis here, too, is not good. The International Monetary Fund (IMF) this week cut its estimate of South Africa’s growth rate for 2025 by half a point to just 1%, barely half of the Treasury’s estimate of 1.9% on which the on-off-on Budget has been compiled.
And that’s on the optimistic side. The IMF has a history of overestimating South Africa’s prospects. Going back to 2009, the IMF overestimated this country’s growth in 11 of the past 15 years, by an average of about 56%.
If the EEAA regulations are implemented as envisaged, they will cut a devastating swathe through South Africa’s already frayed socio-economic fabric.
Growth is already hampered by an intense shortage of skilled, experienced workers who, like it or not, are still concentrated among whites and Indians. To square the racial balance sheet, whites and, to a lesser extent Indians, will in some work categories become virtually unemployable. Self-employment, retirement or emigration will be the only options for those with incorrect pigmentation, including Indians and coloureds.
The EEAA is a disincentive to the growth of small businesses, which will try their best to remain under the 50-employee ceiling. They will automate, mechanise, outsource, lay off staff, and avoid any expansion that necessitates hiring more full-time workers.
Some medium-sized businesses that are already just keeping their heads above water will find the expensive administrative implications of such a complicated system the final blow. They will also be unable to match the inflated salaries that the big corporates can cough up to lure in a very tight skilled-labour market, the appropriate balance of race, gender and disability.
Family-owned businesses are particularly stuffed. How does a white family-owned farm slice and dice ownership in order, at best, to have no more than two-thirds of the ‘top management’ having pale faces? Certainly, and no doubt this is with calculated malicious intent, there will be no way that the tradition of farms passed from generation to generation will be able to continue.
All businesses, but especially those dependent on government tenders, will be tempted to retrench minorities as a way to achieve demographic targets.
The irony is that when demographics, not merit, is the primary criterion of employment in South Africa, with its abysmal education and training system, the result will inevitably be higher costs and lower productivity. But the highest cost is immeasurable. It’s a reminder to minorities that they are tolerated but not valued, and that the degree of tolerance is mathematically calculated according to their numbers, not their worth.