The most notable government attempts to correct past inequities, are the changes to legislation surrounding business, and particularly, labour.
The Employment Equity Act 55 of 1998 (EEA), as amended, is the primary statute that regulates equality and discrimination in employment. It was promulgated following South Africa’s re- admission to the International Labour Organisation (ILO) after the 1994 election. The Act gives effect to sections 8 and 9 of the Constitution, which on the one hand requires every person to be treated equally and fairly in comparison to others, and on the other hand requires those who have been disadvantaged in the past to be treated differently based on their past disadvantage or current inequality. It thus prohibits direct and indirect discrimination on a selection of grounds, including, amongst others, race, birth, and ethnicity, and prescribes designated employers (as defined according to number of employees and company turnover) to follow a consultative process in order to enhance the representivity of their workforce in terms of the available EAP. This process involves consultation with employees and the analysis of the workforce to identify barriers to equitable employment and areas of the workforce profile where there is underrepresentation of the designated group. This is a rather lengthy process, which involves appointing an Employment Equity (EE) manager and committee, who must then set objectives in terms of time-based numerical goals and furthermore monitor and evaluate the execution of the plan. There are also annual or bi-annual reporting requirements, depending on the number of staff members employed by the business (ASL, 2013; Seesa, 2013a).
As mentioned above, there is a stipulation within the EEA that provides for individuals that have been previously disadvantaged to be provided with preferential treatment. This forms part of
reasonable affirmative action (AA) programmes implemented by a company, in line with the intentions of the Act. This involves identifying and remedying barriers to employment opportunities for this group and taking reasonable measures to advantage suitably qualified individuals from this group by providing them with reasonable accommodation and engaging in retention and development efforts. This includes striving toward numerical representation goals linked to the regional demographics and skills profile. Numerical targets are to be justified in detail in the EE plan by the company. The Act stipulates that a person is suitably qualified for a job based on a combination of formal qualifications, prior learning, relevant experience, and/or the capacity to acquire, within a reasonable timeframe, the capacity to perform the work (Seesa, 2013a). The following extract from a speech made by Nelson Mandela in October 1991 is noteworthy in this regard, as it explains, rather clearly, the intention behind the EE law, specifically as it pertains to affirmative action (ASL, 2013, p.7):
The primary aim of affirmative action must be to redress the imbalances created by apartheid. We are not asking for hand-outs for anyone, nor are we saying that just as a white skin was a passport to privilege in the past, so a black skin would be the basis of privilege in the future. Nor … is it our aim to do away with qualifications. What we are against is not the upholding of standards as such, but the sustaining of barriers to the attainment of standards; the special measures that we envisage to overcome the legacy of past discrimination are not intended to ensure the advancement of unqualified persons, but to see to it that those who have been denied access to qualifications in the past can become qualified now, and that those who have been qualified all along but overlooked because of past discrimination, are at last given their due. The first point to be made is that affirmative action must be rooted in principles of justice and equality.
The aims of this legislation are thus, in its core, indeed laudable and justified, as there certainly should be some form of redress of the past injustices that were caused by Apartheid. The EEA is however not the only legislation that affects the business world by driving transformative change. Broad-Based Black Economic Empowerment (BBBEE) is a further part of the transitional laws meant to bring previously disadvantaged South Africans into the mainstream economy. The main aims of this legislation include fostering Black ownership of land and other productive assets and enhancing Black people to senior levels of management. Originally, Black Economic Empowerment (BEE) legislation focussed solely on the Black ownership of business interests, however this approach was scrapped for the broad-based approach, which aimed at improving the lack of skills and meaningful economic growth among Black people (Seesa, 2013a).
BBBEE works on a balanced scorecard approach by which companies are rated on relevant items and then ranked on BBBEE levels according to this score. There were seven elements in terms of the previous legislation, namely ownership, management and control, employment equity, skills development, preferential procurement, enterprise development and, socio economic development. Companies have different rating requirements based on a turnover threshold. Exempted Micro Enterprises (EME’s) are small businesses (turnover under R5 million under the previous codes) and are automatically awarded a level four BBBEE status. A Qualifying Small Enterprise (QSE) had a turnover range between R5 million and R35 million. Under the previous codes, QSE’s could choose to be rated on four of the seven categories. Generic enterprises with a turnover exceeding R35 million face a more cumbersome rating process. There are some industry specific sector codes that vary the requirements for a select number of industries. Furthermore, start-ups are automatically on level four for the first year and there are special requirements for NGO’s, although Black owned start-ups can draw a fair amount of advantage by applying for a higher rating (Seesa, 2013a).
The driving force behind BBBEE is arguably the preferential procurement element. Under this category, companies are required to evaluate the BBBEE status of their suppliers to do business with higher BBBEE rated companies. The BBBEE level of the supplier determines the amount of the spend towards that company that may count toward the BBBEE rating of the purchasing company. Furthermore, to receive points on the employment equity element, the company must have complied with the EEA and submitted the appropriate EE reports and implement an EE plan. In order to qualify for skills development points, the company must be registered with the appropriate SETA, have submitted a skills plan, pay the skills development levies as required and furthermore be seen to be developing priority skills. There are also other minimum requirements on the other scales, such as those referring to voting rights and economic interest under the ownership category (Seesa, 2013a).
Compliance with the BBBEE legislation is a rather technical process and has a large cost implication. The certification alone may cost a company between R15 000 and R50 000 annually, for a generic enterprise. Although this cost may be seen as negligible for a large firm, there are many smaller firms that are placed in this category, particularly in high turn-over, low profit margin industries, for example fuel retail (for which the Department of Trade and industry is currently devising a sector code).
Compliance to BBBEE standards was voluntary at first (and only incentivised through the awarding of government grants, tenders, public-private partnerships, and the preferential procurement mechanism), however the regulations started taking a relatively more prescriptive and punitive approach after 2014, with changes in the legislation. Government and public listed entities are now compelled to adhere to procurement policies, incorporate the BBBEE legislation
in the criteria for awarding of licences and permits, and report on compliance. Changes in calculations, and numbers of points needed, also make it more difficult for companies to attain any given level. These changes meant that companies could have automatically fallen as many as two levels in the higher levels and even three for lower rated companies. With the changes in the codes, the seven BBBEE elements were also reduced to five, with enterprise development fusing with preferential procurement and management control fusing with employment equity. The turnover thresholds were however increased. EME’s could now have a maximum of R10 million turnover, QSE’s are now between R10 million and R50 million and generic enterprises obviously being any business with a turnover more than R50 million. Ownership, skills development, and enterprise and supplier development are now considered priority elements. Non-compliance on certain minimum requirements on these elements will result in an automatic downgrade of the BBBEE status. The new codes provide incentives to support start-ups and small firms, as well as providing more incentives to perform skills development. This includes training unemployed Black people and absorbing Black people into employment at the end of learnership programmes (Seesa, 2013b; Werksmans, 2014; Maruz, 2014).
Adherence to the above legislation not only poses administrative and financial burdens on companies, but also creates notable pressure to contribute to Black economic transformation for companies, as they may be required by clients, state, or general consumer opinion, to conform to it (Maruz, 2014). Although government has still currently taken a stance leaning more towards championship, mediation, and advisory, it is clear that this may likely change to a more forceful approach, noting for example, the strong opinions expressed by the CEE, mentioned earlier, as well as pressure that is applied by empowerment advocates. There have been penalties levied for non-compliance and fraud and the newer legislation takes a firmer stance against common fraudulent practices such as fronting and misrepresentation (Benjamin, 2013; Seesa, 2013a; Werksmans, 2014).
Under the legislation explained above, management does experience immense pressures to transform the workforce and this has led to worrying consequences in terms of the generic and sweeping approach often taken with the interpretation and application of the laws (Hermann, 2013). De Lange (2015, p.1), for example, reports on the strict application of these laws in the state-owned enterprises. Eskom, South Africa’s national electricity provider, is said to be reducing the number of White engineers by 1 081 and White artisans by 2 179 to conform to government requirements and ensure that these two key job categories become “completely reflective of the national and regional demographics” by 2020. De Lange cited a top Eskom manager who told Rapport that Eskom was transforming too rapidly, commenting that “it will be catastrophic if our affirmative action targets now lead to the estrangement of people whose skills we need.” There have also been some other high-profile and rather unsettling cases of this type of over- application of the EE laws (Hermann, 2013). Since management is obliged to meet employment
equity targets, practices such as allocating token positions to Black employees, training affirmative action hires to replace existing employees, paying unrealistically high salaries to Black managers, or appointing less qualified people are often unavoidable. These practices result in numerous negative consequences for organisations and individuals from both the designated and previously advantaged groups (Coetzee, 2005). According to the Solidarity Research Institute (as cited by Van der Westhuizen, 2015), a 2007 report released by Deloitte and Touche pointed out that 81 percent of businesses struggle to find suitable staff and 76 percent reported that finding and appointing employment equity candidates posed a significant problem.
The EE and BBBEE legislation have far-reaching consequences for business and individuals. Despite the growth in the African middle class mentioned earlier, it is obvious that there is still a large number of South Africans who are unemployed or not economically active, suffering poverty and not sharing in any form of prosperity that the economy generates. This leads to a point where one must pose serious questions about the strategies employed by the current government, in philosophy, theory, and execution, with particular reference to the legislation discussed above. Hermann (2013) emphasises that AA in South Africa (and by extension BBBEE) remains a controversial issue and honest and thoughtful debate is mostly absent. Government visions are laid down as the norm and any opposition is often labelled as counterrevolutionary hindrances in the way of transformation, harking back to apartheid, or as racist ̶ particularly when such opposition is from White South Africans, who have some obvious objections to the status quo that are often understandable and justifiable. Simply criticising affirmative action is however not appropriate, especially without examining one’s intentions behind the discussion. Simple criticism is however not the issue at stake, since the issues with the policies and associated practices discussed above are deeper than simple approval or disapproval of them or speaking in terms of replacing, ‘fixing’, or scrapping them. These economic policies and statutes mentioned above are individually and collectively not capable of resolving the issues at hand, and there are clearly other large issues at stake (Hermann, 2007; Macozama, 2007).
Arguably, government has the largest role to play in addressing social and economic issues as well as regulating, incentivising, and collaborating with the private sector in this regard. EE and BBBEE have been widely criticised for not establishing meaningful social and economic change in South Africa. Macozama emphasizes that transformation is urgent and that the problems discussed in this thesis need urgent resolve. The “economic question” (Macozama, 2007, p. 178) was at the centre of exclusion in the Apartheid years and will subsequently be at the centre of the debate when discussing any form of remediation. The first question of transformation must thus be to include, in the economy, those who have previously been left out. Although the Employment Equity Act has opened the job market, removing barriers for those who were previously excluded from work, BBBEE and EE have had rather many “elitist consequences” (Macozama, 2007, p. 177; Ramphele, 2012). Macozama goes as far as saying that this should be expected, as socialist
outcomes are not to be expected from a capitalist system. The idea behind BEE was to transform the South African economic context by presenting an opportunity for those who had been marginalised and left out to be empowered to participate and share in the abundance of the economy. In an ideal world, BBBEE and EE would bring an end to discriminatory employment practices, promote equal opportunities in the workplace, and transfer skills. It would give all Black people the opportunity to better their lot and be economically active citizens. However, very little progress has been made for the ‘ordinary’ Black South African. A real issue in this regard is the large BEE deals with individuals who were well connected politically with large corporations from the inception of BEE. These Black people, who were advantaged under the previous regime, became first beneficiaries of affirmative action and BBBEE. These individuals are making massive financial gains in comparison to low earnings of a large majority of Black South Africans. Other ways of marginalisation under the new regime include remediation based on political and union affiliations, nepotism, cadre deployment, corrupt recruitment practices, as well as membership of a family or ethnic group (Govender, as cited by Hermann, 2013; Macozama).
Transform SA (2014) quoted Gwede Mantashe, Secretary-general of the ANC, as saying, at the annual Black Management Forum in Sandton, that the presence of Black people in the top hundred richest South Africans means that there has been redistribution of wealth. He also criticised society’s attitude toward successful Black people and commented that successful Black South Africans are often assumed to be corrupt or have some connection to the ANC. This statement shows that the ruling party does value creating a Black elite and that rumours of corruption are certainly pervasive.
Mbeki (2011, p. 1) is also strongly critical of BBBEE in this regard, as it is said to “promote a class of politicians dependent on big business”; and therefore, the interests of “big business” is promoted “in the upper echelons of government”. He goes as far as accusing BEE of being the brainchild of big corporations that served to create a buffer group within the political class, using their marginal assets, to protect the interests of “big business” and maintain the status quo in which South African organisations operated at the end of Apartheid (Mbeki, 2011, p. 1). He notes further that BBBEE promotes an anti-entrepreneurial culture among the Black middle class by legitimising an environment of entitlement; and affirmative action promotes incompetence and corruption in the public sector as ruling party allegiance and connections serve as entry and promotion requirements instead of tough criteria. It is for these reasons, amongst others, that prominent political and business leaders have called for BBBEE to be scrapped. Their main argument is that BBBEE has not achieved its aim, which is to share the country’s wealth with previously disadvantaged sectors of society and to promote the development of productive and sustainable Black business, particularly in the small and medium sectors. BBBEE also seems to have failed to create viable Black businesses, which are capable of producing quality products and services that can compete at reasonable prices. BBBEE companies often bid for tenders and
then outsource the work at cheaper prices to established companies (Maidza, 2012, p. 2). Trevor Manuel, former Minister of Finance, and minister in the presidency, has also long been a critic of BBBEE, expressing his frustration at corruption in particular. The South African Institute of Race Relations, in its December 2012 submission to Parliament on the BBBEE codes introduced alongside the new Bill, insisted that BBBEE should be scrapped, not reformed, quoting objections from the trade union federation Cosatu and the South African Communist Party to BBBEE as it stands and the fact that it has indeed only benefitted a Black elite instead of addressing more wide-spread economic inequalities. There seemed to be agreement that BBBEE is not working and that something had to be done, “if not for economic reasons, then just to satisfy an increasingly angry public who are not seeing changes to their circumstances, despite BEE being introduced in 2003” (Benjamin, 2013, p. 3). The Black Business Council told Parliament that BBBEE had not been successful, although they did not agree that it had to be scrapped (Benjamin). One of South Africa’s best-known Black entrepreneurs, Richard Maponya, blames the country’s lack of entrepreneurial activity on BEE. He is of the opinion that it fostered a culture of entitlement and expectation that has robbed matriculants and university graduates of their incentive to start a business. Other local business giants echo his sentiments, such as Sam Motsuenyane, who also built his business empire throughout the Apartheid system. This entitlement culture started brewing in 1976, according to Maponya: “our youngsters believed that when the ANC takes over, we are going to grab whatever belonged to a white man and give it to