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Trade union Solidarity has published an “Impact Study” detailing what would need to happen in South Africa’s economy to make the government’s new BEE targets a reality.
The study is in response to the Department of Employment and Labour’s proposed sectoral targets for employment equity, which aims to push all designated businesses in South Africa to transform their employee makeup to be demographically representative.
Designated businesses are all those that employ 50 or more workers in the country.
The minister has been empowered to set the targets through the new Employment Equity Amendment Act, which was assented to by President Cyril Ramaphosa in April. The Act is not yet in effect, with the department expecting to promulgate the laws in September.
Failure to meet the targets could result in hefty penalties, including millions of rands in fines.
Despite not yet being in effect, the laws and proposed targets have drawn the ire of business organisations and unions like Solidarity, which have warned that the measures will effectively force businesses to implement racial quotas.
The government has argued that the targets are not quotas, because they are flexible, only have to be met over a five-year period, and are open to exemptions based on various reasoning.
However, groups like Solidarity say that there is no other way to interpret the new laws – simply because the reality of South Africa’s job landscape and dwindling economy make it impossible for any business to meet them in a natural way.
Two options to meet the targets
According to Solidarity, there are only two ways businesses can meet the targets: either they have to expand and grow so that new hires can build up the employee profile to match the targets, or they have to find another way to replace the employees they currently have with the required racial groups to meet them.
For example, looking at a national company operating in the agriculture sector, a company would have to adjust its skilled employee base so that it is made up of:
- 68% black workers
- 8% coloured workers
- 2% Indian workers
- 8% white workers
- (The remaining 14% is not accounted for in the new regulations, which is another huge problem legal experts have identified)
According to the Department of Labour, the current makeup for this sector is 51% black, 18% coloured, 2% Indian and 26% white (3% unaccounted for).
To ensure the targets are represented, a company of 100 people would have to grow to 325 people – growing by 225%.
It would have to hire five Indian workers, eight coloured workers and 170 black employees to match the targets (an additional 45 workers would be present to account for the fact the target figures don’t add up).
This leaves option two: lean into following rigid racial quotas with the employee base you have. Instead of hiring workers, it’s far easier for a business to simply get rid of their white and coloured employees and replace them with black workers.
Following this method would be unlawful, legal experts warn.
Hitting all sectors
While the example above is a rudimentary assessment of one category in one sector, Solidarity’s Impact Study looked at and extrapolated the targets across all sectors.
The union said that huge – and impossible – levels of growth are required across every sector in every skill category to make the growth option viable for businesses in the country. The table below outlines the growth requirements just for the skilled workforce (which represents the bulk of hires).
“Given South Africa’s enormous economic challenges, it already is tough for a sector to basically achieve any growth at all.”
“Expecting sustained double-digit growth is exceedingly unrealistic, and expecting sectors to more than double over the next five years is nothing but wishful thinking. For virtually all sectors, it is impossible at this level to grow into the ministerial targets without people having to vacate their posts,” it said.
Underpinning the entire study, however, is the macroeconomic reality. As South Africa grapples with a possible full year recession, the required levels of economic growth to make the employment targets work is unimaginable.
According to Solidarity, the country would need to hit 11% growth per annum is an absolute minimum requirement to hit the targets, with the more realistic growth figure per annum closer to 25% per annum.
South Africa’s GDP over the past ten years has struggled to achieve growth of more than 1%.
“It, therefore, is painfully obvious that it is impossible for the national economy, as well as for individual sectors, to grow into the minister’s targets,” it said.
Instead, it appears the only option left to businesses is to replace their workforces, which would result in massive job losses for racial groups other than black South Africans.
Solidarity said that analysis shows that the targets are completely detached from reality, and has sent warnings and formal messages to the department to this effect.
Meanwhile, legal challenges to the new laws and targets loom large, as business groups start organising to push back against them.
The full report can be accessed below:
Read: Deadline for South Africa’s strict new BEE rules draws near
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