Demographic Representivity – A Mortal Threat to Private Companies
19 October 2022
The fracas caused by DisChem's ill-advised moratorium on the hiring and promotion of white employees has focused attention on the government's potentially fatal intention to impose demographic representivity (DR) on the private sector in the same manner that it has already done - with such catastrophic consequences - in the public sector.
In his letter of 19 September, DisChem CEO Ivan Saltzman informed employees that "Following a review of the employment equity profile and the recent BBEEE verification process, it is evident that our organisation's efforts to effect transformation in terms of our employee profile remain inadequate."
The letter went on to state that "a moratorium is placed on the appointment of white individuals. This includes external appointments and internal promotions."
Mr Saltzman's letter was triggered, no doubt, by the Employment Equity Amendment Bill that is awaiting signature by President Ramaphosa and that is expected to come into effect in September 2023. The Bill will affect designated employers with more than 50 employees and will empower the Minister of Labour "to determine sectoral numerical targets for the purpose of ensuring the equitable representation of suitably qualified people from designated groups (blacks, women and persons with disabilities) at all occupational levels in the workforce". In other words, the Minister will be able to dictate to companies the racial composition of their staff at all levels of employment.
The Bill will for the first time also implement section 53 of the Act which will require any company wanting to qualify for state contracts to be issued with a certificate by the Minister confirming its compliance with the Act - including the new numerical targets that the Minister can now set.
All of this is intended to force the economy toward the ANC National Democratic Revolution's longstanding goals of DR in all sectors of society and the economy. As Minister Rob Davis put it in 2012, "We need to make sure that in the country's economy, control, ownership and leadership are reflective of the demographic of the society in the same way that the political space does." It goes hand in hand with similar initiatives to impose DR on universities, in the legal profession, in the public service, and elsewhere throughout society.
There are, however, very good reasons why DR should not be applied to the private sector in the same manner in which it has been imposed on the public sector.
Firstly, there is no constitutional requirement for DR outside the public sector. Had the Constitution's authors intended DR to be applicable to the private sector, they would certainly have included a specific provision to this effect.
Secondly, the imposition of DR in the public sector has been one of the main causes of dysfunctionality in government departments. The public sector can continue to function regardless of its performance because it does not have to satisfy customers or produce a profit. However, if companies are inefficient and unprofitable, they go out of business. To succeed, they must appoint and promote key personnel on the basis of merit alone.
Thirdly, DR is irreconcilable with the foundational principle of non-racialism. It will prevent people, solely on the basis of their race, from gaining employment and promotion in their chosen professions. It will accelerate the haemorrhaging of scarce skills from the private sector - just as it has already done in the public sector.
No reasonable person would question the need for effective measures to promote and advance black South Africans in the economy, to increase the number of black business owners and to develop black human resources and skills. This process should proceed rapidly, naturally, and organically until black South Africans assume their rightful place in the economy on the basis of merit and accomplishment. However, the BEE/EE process goes much further - as evidenced by what are racial quotas by any other name - that companies like DisChem are expected to meet to avoid fines of up to "10% of turnover" that could bankrupt even the largest businesses.
However, like all such exercises that fail to take account of human nature, individual rights and economic reality, DR will have damaging consequences. Not only will it make it increasingly difficult for the private sector to produce the wealth and jobs on which the future of the country depends, but it will also seriously undermine prospects for national unity and the building of a successful multicultural and non-racial society.
DisChem has now withdrawn its letter - no doubt because of the angry public outcry and because it contravenes the Employment Equity Act's prohibition of absolute quotas. However, the mortal threat that the imposition of DR poses to the private sector, to the economy and to race relations remains - and must be challenged. It is time for private companies to step up to the plate to protect and retain the services of their loyal employees and to ensure the future viability of their businesses.
By FW de Klerk Foundation, 19 October 2022
