EEB will push SA’s unemployment rate through 50% - IRR

18 March 2022

More than half of South Africa’s workforce will be condemned to joblessness if the economically catastrophic provisions of the Employment Equity Amendment Bill (EEB) come into force.

This warning was made yesterday in an online briefing on the likely legal, economic, and societal consequences of the EEB by senior Institute of Race Relations (IRR) analysts, Head of Policy Research Dr Anthea Jeffery, and Head of Campaigns Gabriel Crouse.

They said such legislation should not even be on the table in South Africa at this time and would, if implemented, seriously damage any chances of the country attaining meaningful growth.

Should the Bill become law South Africa will breach the 50% unemployment mark (on the expanded definition), because the EEB will deter even more domestic and Foreign Direct investment, erode service delivery even further, while driving State Capture 2.0. The trend of counterproductive policies that have stumped recovery and contributed to more than 46% unemployment (on the expanded definition) will be accelerated by the EEB to breach the 50% mark.

The two core provisions of the Bill seek to allow the Minister of Employment and Labour to set racial quotas for job appointments by businesses with 50 employees or more in specified sectors of the economy. The second bars such businesses from contracting with the government unless they have complied with the minister’s quotas or “justified” their failure to do so on “reasonable” grounds.

The Bill contains heavy fines for any failure to comply with the minister’s racial quotas (or “numerical targets”, as current minister Thulas Nxesi prefers to call them). Penalties begin at R1.5m or 2% of annual turnover for a first “offence” – and may rise to R2.7m or 10% of turnover (whichever is the larger) for a fifth similar offence within three years. Fines of this magnitude could bankrupt many firms.

In addition, businesses that fail to fulfil the minister’s unrealistic quotas – or to justify these failures on terms that bureaucrats are willing to accept – will be denied compliance certificates and so be excluded from contracting with the state.

The EEB is in conflict with many provisions in the Constitution. Dr Jeffery said that President Ramaphosa had a constitutional duty “not to sign the EEB into law if he has reservations about its constitutionality”. Instead, he “must” refer it back to the National Assembly “for reconsideration”.

Crouse and Jeffery pointed out that the draft law would not help those for whom it was intended, and that IRR polling showed that most South Africans had little faith in appointing people to jobs based on their skin colour.

Crouse said that “over 60% of those polled believe that people should be appointed based on merit…”

Employment Equity racial quotas have already crippled the capacity of the public sector, filling it with a host of unqualified and unaccountable people, many of them intent on self-enrichment. The resulting malaise is everywhere apparent.

The EEB will produce the same results in the private sector, because it will further entrench patronage economics – it is a matter of who you know, and the political power you have, and not whether you are the best man or woman for the job.

Issued by Gabriel Crouse, IRR Head of Campaigns, 18 March 2022