Employment Equity Amendment Bill: DEL response to submissions; with Minister

Meeting report

The Chairperson welcomed everyone, and said that the focus of the meeting would be the briefing on the Employment Equity Bill. She said there was another Bill awaiting consideration.

Apologies were received from Mr M Bagraim (DA).

Minister’s Overview

Mr Thulas Nxesi, Minister of Employment and Labour, said the objective of the Employment Equity Bill was to promote equal opportunity and fair treatment in employment through the elimination of unfair discrimination. The bill also aimed to implement affirmative action towards addressing the disadvantages in employment that were experienced by designated groups, and to ensure their representation in all occupations and levels in the work place.

The major change to the Employment Equity Act (EEA) was section 15(a)(3), which states: “the Minister may after consulting the relevant sectors with the advice of the Commission for Employment Equity, for the purposes of ensuring the equitable representation of suitable qualified people from designated groups at all occupational levels in the workplace, by notice in the gazette set numerical target for any national economic sector identified in terms of subsection one.” Consultation(s) with sectors and stakeholders in this respect had been ongoing since 2019.

The bill promulgated section 53 of the EEA, which had the effect of excluding companies that did not comply with the EEA targets, from doing business with the state. One of the effects of the amendment bill was to reduce the regulatory administrative budget for the submission of employment equity reports by small employers -- companies that employed up to 49 employees. In order for small employers to obtain an EEA certificate of compliance, they needed to comply only with chapter two of the EEA on unfair discrimination, and comply with the National Minimum Wage Act.

DEL on Employment Equity Amendment Bill

Mr Thembinkosi Mkalipi, Chief Director: Labour Relations, Department of Employment and Labour (DEL), outlined the Department's responses to the EEA Bill and the actions taken by the Department to address the concerns raised on the Bill. Reports were given on the under the following categories:

• Constitutional mandate;
• Objectives of the Employment Equity Act (EEA);
• EEA status in the four occupational levels and persons with disabilities – three-year trend analysis (2018-2020);
• EEA case law;
• Socio-economic impact assessment and consultation process on the EEA Bill;
• Matters arising on the EEA Bill (Section 15);
• Areas of agreement to correct in the Amendment Bill (Section 15A(3)); and
• Consultation progress with relevant sector stakeholders.

Discussion

Dr M Cardo (DA) asked about issues of constitutionality of the Bill. He said that the presentation had referred to Solidarity trade union’s court action, but had failed to mention other cases that were set out in 2004 in respect of new measures that must target the disadvantaged and promote the achievement of equality. He wanted to know if the amendment bill was compliant with these measures.

From some submissions received during the course of the public hearing, the Committee had been informed that ratio targets helped only about 15% of black people, who were either skilled or politically connected. The income on equality had also risen significantly from 1994 till date, but the poorest black South Africans received the same share of the national income in 2015 as they did in 2006, despite stricter targets that were introduced through the 2013 amendment bill. Dr Cardo asked if the amendment bill would effectively address these concerns which were raised during the public hearing.

The distinction between quotas and targets were unclear in the presentation. He observed that the targets stated were aspirational goals. However, aspirational goals, carrying the threat of punishment in the form of a withheld certificate of compliance, could prevent organisations from transacting with the state, affect their revenue lines, result in the liquidation of businesses, and job losses. He wanted to know if this approach was justifiable in the context of economic destruction and decay partly caused by the pandemic and lockdown, together with the problems in the structural and policy environment. He asked how the bill in its current form would impact economic growth and job creation in South Africa.

The Chairperson requested that questions should focus on asking for clarity from the Department, and not on targets, which were part of deliberations. The Committee would still have time to deliberate.

Ms C Mkhonto (EFF) said she had expected that the designated groups would be divided into male and female. However, she had observed with pleasure that there was a slide that addressed the disabled. She also noted that there was no report on the status quo regarding employment equity and the levels within the corporate environment. There was also no report on issues involving the youth and the status of youths within the corporate levels.

She asked for clarity on slide 27 as to whether employers’ claims would be verified when they said that they were unable to comply due to insufficient recruitment opportunities. Would the advertisement for recruitment be checked?

She asked the Department to provide clarity on the abbreviation SARC on slide 28.

She observed further that she was a little uncomfortable with the closing statement -- that the Department was not obliged to agree with parties after consultation, and the Minister would decide if there was no agreement. She argued that the statement was presented prematurely, considering that the Committee was still busy with consultations.

Ms H Denner (FF+) expressed her concerns on the socio economic impact assessment (SEIA) reports before the Committee and the Cabinet in respect of the amendment bill. She pointed out some missing information, such as no comparisons with other countries with similar circumstances on legislation, no thorough financial impact analysis, and the report did not seem to conform to international best practices. She wondered if the Cabinet could confidently say that the report in its present form assured them of the consequences -- both intended and unintended -- of the amendment bill.

Dr N Nkabane (ANC) commented that on slide 19, section 1, the definition of designated employer was amended and revised to limit the application of companies with 50 or more employees. She asked if this provision would not raise problems where companies tried to reduce their number of employees in a bid to avoid this section, and get exempted. How would companies be impacted if they tried to increase their human capital to more than 50? She said a balanced approach should be explored to ensure that even though companies were exempted, job creation would still be preserved.

Slide 28 indicated that the system was up and running and automated, and that the system would be reconfigured and integrated with the Commission for Conciliation, Mediation and Arbitration (CCMA), the case management system and National Minimum Wage exemption system. She asked if the system would not be prone to manipulation in view of the recent challenges experienced with the electronic system. She also asked about the preparedness on the part of the Department for capacity building of employees and their functional requirements.

DEL's responses

Mr Mkalipi, said that there were cases where the constitutional court had pronounced on the constitutionality of the Bill, and the Department was confident that the bill would pass the test of time.

The targets set were not quotas. If they were quotas, the law would have not allowed companies the opportunity to indicate if they had a justifiable reason why they could not meet the targets set, but would have compelled them to meet the targets at all cost. The legislation had, however, been confirmed by the court as the right legislation to redress the imbalances of the past. It was a democratic country and people would continue to challenge legislation, and the government must be ready to defend the law. He was confident that the legislation would pass the test of time with respect to the issues it sought to address.

Mr Mkalipi noted, however, that there would be consequences where companies did not comply with the law, but he hoped that companies who were unable to meet their targets would indicate the justifiable reasons why they could not do so. Deliberations were ongoing with several companies with respect to setting targets.

On the issue of youth employment, he said that the bill dealt only with the question of redressing the imbalances of the past. There were no available statistics to use to evaluate if youths were being employed, neither did the Department have a legal provision that allowed it ask these kinds of questions. He affirmed that the problem of unemployment of youth was very bad in the country, and more efforts had to be made to ensure that more youths were absorbed into the labour market.

Recruitment was important for employment equity because it affected turnover, and turnover was required to effect transformation in a company.

Mr Mkalipi explained that consultation was not negotiation in the labour market. According to case law, one consults in good faith in order to reach a settlement. However, the law was clear that in consultation, if there was no meeting of minds of the parties, it could not then be said that the law would not be applicable. The sector understood what these consultations meant. He noted, however, that consultations would not carry out with the intention of not reaching an agreement.

In respect of the SEIA, there was a template that needed to be filled, and that template indicated what information the Department could give. Cabinet had looked at the SEIA and agreed to it. If Cabinet had not been satisfied, it would have sent it back. The Department was following the process that had been put in place in terms of the issues that needed to be answered. If it was believed that the SEIA did not give enough information, then an engagement could be commenced with the Department of Performance Monitoring and Evaluation (DPME) to get more information about the templates.

Mr Mkalipi said that the exclusion of small companies with fewer than 50 employees was not new. The law currently did not apply to companies that employed fewer than 50, except if their turnover was high. The Department was, however, trying to remove the requirement of turnover due to its inability to monitor, assess and enforce the turnover of companies. In terms of enforcement, it was easier to base the qualification of companies on their number of employees. More work needed to be done to ensure that small businesses suffered fewer burdens that could affect their ability to operate.

The system had been in operation for a very long time and had not had issues, but there was no guarantee with any system.

Regarding the DEL's capacity, the number of inspectors would need to be improved, but the Department was making efforts to work with the number it currently had. It was doing all it could to ensure that enforcement was effectively carried out, while non-compliant companies were called out, which would act as a caution other companies.

Mr Thobile Lamati, Director-General, DEL, provided clarity on the effect of diversity on economic growth and job creation in the country.  He said that the current crisis was a result of the failure of the labour market, especially on the part of companies who over the years had not implemented their employment equity plans. Diversity management would, however, enable economic growth and job creation, and more skills would become available for the benefit of the country as a whole.

Follow-up questions

Dr Cardo asked about the consultation process around targets. He was concerned about what would happen when there was no consensus between the Minister and relevant sectors over targets. He wanted to know if the Minister had the undisputable discretion to set targets and implement where there was no consensus reached. He also wanted to know if there were any parameters that would guide the Minister in a case of no consensus.

The Chairperson responded that the Department had responded on consultations. She reminded the Committee that it would still engage on deliberations, and their concerns would be addressed at that time.

Ms Denner wanted clarity on what the parameters of the Ministers discretion would be in respect of setting of targets, or if he would have free discretion to act at will.

DEL's response

Mr Mkalipi clarified that the abbreviation of ‘SARC” in slide 28 was meant to read ‘SARS (South African Revenue Service) Certificate.'

He said there were court decisions that explained what consultation and negotiation were. No law had defined consultation or negotiation -- the law only provided that the Minister must consult the sector concerned. Reasonableness was, however, required on the part of the Minister when reaching decisions.

Further questions

Ms Mkhonto restated her concern about the closing statement, which she described as intimidating and appearing to nullify any action of the Committee.

The Chairperson said that the Committee had completed its consultations. Several issues had been raised, some of which the Committee would agree with, and disagree with others. The Committee at this stage would receive the Department’s response to the issues that had been raised, but it was not compelled to agree with all that the Department had presented. She asked Members to wait patiently for the deliberations.

Minister's comments

Minister Nxesi said that public policy issues were very complex and occurred in a rapidly changing and turbulent environment. They also created a lot of uncertainties and could generate conflict among the different interest groups. However, through persuasion and powerful reasoning, a consensus could be reached on very difficult issues. Consensus may not be unanimous, but it was important when dealing with different interest groups with different interests. Where the Department was unable to reach a consensus, the Department would take into consideration all submissions made before acting. The Ministry did not act unilaterally.

He added that apartheid had provided the basis for employment equity and radical transformation of the country. If companies had demonstrated their willingness to transform, the proposed measures would not have been necessary. Therefore, the social economic impact assessment had been done to identify and assess the potential economic and social impacts of a particular proposed policy. The Department did not act unilaterally, but considered all views persuasively, while powerful reasoning ruled.

Chairperson’s closing remarks

The Chairperson said that the Committee would prepare to deliberate by taking into account all that had been raised by the Department. Transformation was quite a challenging struggle, and Parliament was a site of the struggle. It was the Committee’s responsibility to receive various viewpoints on what would help the country, and must engage, persuade, and be tolerant other viewpoints while maintaining discipline. The ultimate goal was to have legislation that would help the country.  

The Committee would meet next week, and would probably meet the office of the Auditor General (AG) on 28 May. Two entities had been called by the Standing Committee on Public Accounts (SCOPA), and the Department needed the AG’s office to put it through. A recess would start soon, and the Committee must still apply to sit for deliberations during the constituency period.

The Chairperson added that she would seek permission from the House Chair for the Committee to be allowed to finish its deliberations on the International Labour Organisation's (ILO's) Convention 190. She requested that when the Committee resumed in August, the Department would brief the Committee on Convention 190. Copies would be circulated to Committee Members for review.

The meeting was adjourned.