New EE measures will trigger skills, capital flight – IRR

Institute says it would be a mistake to force the private sector to follow the path of the public sector

New Employment Equity measures will trigger skills, capital flight – IRR

14 April 2021

South Africa risks triggering a flight of scarce skills and capital if it presses ahead with amendments to the Employment Equity Act that would give the labour minister the authority to set employment equity targets for employers across the economy.

This is the warning Institute of Race Relations (IRR) head of policy research, Dr Anthea Jeffery, delivered to parliamentarians yesterday.

Said Jeffery: “The bill will stall economic recovery; prompt a further flight of scarce skills and capital; leave more people unemployed; add to poverty; and increase inequality between the small black elite that may benefit and the great majority of black people, who will be further harmed.”

Jeffery’s warning came as Parliament began public hearings on the controversial Employment Equity Amendment Bill.

Proposed changes will enable the labour minister, in consultation with the stakeholders of a particular sector, to set numerical sector-specific employment equity targets. Companies that fail to comply with the targets can be fined between 1% and 10% of turnover and will be disqualified from doing business with the government.

Jeffery warned that businesses would be reluctant to expand at all if they were forced to hire staff on a basis that did not take into account skills and experience. “We risk businesses closing doors, jobs being lost.”

South Africa should abandon race as the means to determine who should benefit from empowerment, and adopt a means test instead. Given the evidence of what the pursuit of racial quotas has done to the public sector, such as poor service delivery, “we should not be doing the same to the private sector, because our economy is in a great deal of trouble”.

Jeffery added: “Even if it were not in trouble, it would still be wrong in principle to require businesses to do things that do not make sense. What we really need is an organic process in which we get excellent schooling in place ... [and] instead of seeing jobs as a finite quantity that can either go to black or white, we should see the enormous capacity this country has to expand jobs for everyone. With better skills and more experience there will be a move with black people being in the predominant role in all tiers of employment.”

Responding to Lindelwa Dunjwa, chair of the portfolio committee on employment and labour, who asked whether the IRR wanted the government to leave the “private sector alone ... in the hands of white people who have got the skills”, Jeffery said: “To force the private sector into a situation echoing that of the public service [in which] capacity and delivery has declined would be enormously unfortunate for the entire country.”

Jeffery pointed out that no comprehensive socioeconomic impact assessment had been conducted on the proposed amendments.

Jeffery is the author of the IRR’s extensive and detailed Economic Empowerment for the Disadvantaged (EED) proposal which demonstrates how it is not only possible but necessary to address lingering and widespread disadvantage in South Africa through measures and strategies that focus on addressing the actual disadvantages that burden millions rather than on their race.

This report – here – dwells on the mounting failures of race-based empowerment, and the advantages, particularly for the poorest South Africans, of a new approach to empowerment.

Issued by Anthea Jeffery, IRR Head of Policy Research, 14 April 2021