Industry speaks out on Employment Equity Bill

…….article dated 1 May 2021…..

Minister’s plans to apply BEE targets too dictatorial…..

The highly contentious Employment Equity Amendment Bill, tabled in a hurry by Minister of Employment and Labour,Thulas Nxesi, has now reached a stage in parliamentary procedure where the labour committee has considered a summation of public comment and submissions in hearings but will only commence any debate on the proposed legislation after Parliament re-opens probably about mid-May. As the Bill intially stands before any changes, many business leaders complain that in its present format its passage will seriously undermine economic recovery.

The three days of hearings so far held were stormy at times, with parties expressing strong views on the principle of uncontestable selection of targets being imposed by the Minister for.  They said that targets set for a broad sector of business and industry without a detailed approach for each category was not the proposals generally, when unpacked, were not practical enough for any serious application at workshop or floor level and were lacking in detail on how the target figures were to be selected.

Whilst nearly every one of the 23 submissions made by major business undertakings agreed with Department of Employment and Labour (DEL) that a way forward was necessary as stated in the preamble to the Bill to address as soon as possible continued  inequalities in the workplace they said this would never happen if the way it was being proposed was adopted.  Most agreed, however, with President Ramaphosa’s call to speed up transformation but said a better way had to be found.

Caveats

The majority of submissions also emphasized that such propsals would deter investment and undermine the economy at a critical moment when the economy was in its current delicate state. Some considered such processes as  instituted in terms of the Bill to be unconstitutional and warned of the red tape that would  accompany such proposals.

One submission fro a major industry body warned that the Bill if implemented as it was woud in fact slow down Minister’s BEE policy programme  and be a barrier to transformation

High handed

Business Unity South Africa (BUSA) was clear in its objections to manner in which the Minister would set targets peremptorily.  “The Bill simply empowers the Minister to determine targets without reference to any prescribed framework”, Kaiser Moyane of BUSA said.   He added that even worse was the fact that non-adherence to arbitrarily chosen numbers would place many employers the state needed outside of the queue to deal with government and possibly many companies into a position of retrenching staff.

“The consequences of not meeting the sectoral targets could in many cases destroy revenue lines resulting in liquidation and job losses”, Moyane said. This Bill, said BUSA, contravenes the constitutional procurement principle that when a state organ contracts for goods or services it must do so in accordance with principles of fairness, equitability, transparency, competitiveness and cost-effectiveness.”  It does none of these things , he said.

The “no’s” have it

In the final count, 56.5% of the submissions were not in support of the proposals and had major disagreement with the entire concept.  43.5% were only partially in support of the Bill, some of which only had very minor changes to suggest.

The area of major disagreement are the clauses by which the Minister is proposing to achieve faster transformation.    It was claimed in a good number of the submissions that when it came to the setting of sector-specific targets for all manner industry and business entities, the manner of application proposed was far too broad for any serious and practical application at workshop or floor level.

Clumsy clauses

Mostly, those in disagreeing with the proposals were in opposition to unexplained process by which DEL will select targets and the manner by which the Minister would fix them. They said that the Minister could not possibly set such numbers without a deep understanding of all sectors of the economy, what factors were at play in the various manufacturing and industrial areas such as the various effects of BEE at manufacturing level and the outcome of regulations on the issue of pricing.

The SA Forum of Civil Engineering Contractors (Safcec) said forcing companies to adhere to targets in the manner proposed was not only unconstitutional but said the proposals were in total conflict with what has been drafted so far with a Public Procurement Bill, which was aimed at eliminating fragmented targeting and government make various arrangements with the state on a ‘here and there’ basis, which was exactly what the EE Bill did in an ad-hoc manner.

BUSA said it was totally inappropriate for state procurement matters to be dealt with by employment legislation.

Coal face

The majority of the  submissions complained that by providing an overall blanket nationwide target for any one sector would be a limiting factor in reaching overall BEE targets since regional factors and influences were strong; were always at play and would always undermine any broad-brush numbers placed by distant government offices.   A far more flexible approach was needed, it was said, and calls were made for a localized approach, where there were grounds for varied applications under different circumstances.

All in a rush 

Most of those objecting to key provisions also found that the limited 30-day period from first engagement to a conclusion provided by the Minister in the application process was a totally insufficient amount of time for the setting of targets for any sector.

Furthermore, such a short period did not allow for disagreement.  Submissions expressed the fear that the Bill articulated no process to be followed on total disagreement or deadlock and consequently, on these issues alone, it was felt that any legislation had to be much clearer on definitions and considerations and provide procedures,

Different animal

Committee chairperson, Lindelwa Dunjwa, tried to allay fears that the Bill seemed to have changed from what was agreed at Nedlac, saying that the it was not yet final. MPs were reminded by her that in the Bill before them it was proposed the Minister would publish a gazetted notice listing the national economic sectors which will be impacted having consulted the individual sectors.  Two MPs reminded her that this was only a single round of consultation that was proposed, and this was before the application of target numbers for the sectors arose.

Chair Dunjwa commented at that point, ““There is still a long way for parties and stakeholders to influence the final product of the Bill. The public participation processes that the committee enters into will also be undertaken from the ministry and department’s side,” she said.

On MP remarked that factors for any argument were made worse by the clauses which stated that the Minister “would define national economic sectors and will, after consulting the National Minimum Wage Commission for the purposes of ensuring the equitable representation of suitably qualified people from the designated groups at all occupational levels, set numerical targets for any national economic sector.”

Bottom up better

The point was then put forward by the parliamentary compiler that a number of the submissions were calling for the approach to the rating of targets be altered with all sectors being treated as equitable first, then broken up into further sectors and sub-sectors after consultation and a better understanding gained of the economic factors, state services and supply chain structures obtained.

Accordingly, it was pointed out, there had to be some form of joint consensus approach for target setting to be even achievable and to render compliance possible by whomsoever the Minister allocates to oversee compliance and for the entity making a return. A notable contribution on the factors on the difficulties of compliance had come from the construction, IPP and renewable energy sectors, the research officer told members.

Not superficial

Submissions argued that all parties had to be sharing in a meaningful way on how each industry and economy works, more aware of factors affecting transformation in any particular sector and the specific challenges faced.  They further argued that with each industry so different from the other, the Minister and his team may not have an understanding of all factors at play and set sector targets that were inappropriate or that which inhibited transformation.

Moyane of BUSA said “this one size fits all approach on target setting” could lead to serious consequences such as capital flight of foreign investment and skills and this must be of concern to government.

A number of parties totally rejecting the Bill as it stood were of the opinion that to propose such legislation in a period which represented the most serious downturn in the economy for many years was totally ill-timed and the idea of any such changes should be delayed as a matter of national importance whilst the economy was so delicate.

Telkom’s Siyabonga Mahlangu highlighted the current tough economic climate and said it was difficult to make appointments that may be necessitated by the new numerical targets.  Others pointed out that simplistic numerical targets were totally inappropriate in some sectors where race, colour or family history were irrelevant in the difficult search for skills and specialized training. One submission called the processes involved lop sided, dictatorial and unconstitutional.

Small business

On the close of the meeting, the parliamentary officer picked out a number of submissions which had noted that in the case of the clauses regarding companies of 50 employees or less and therefore falling outside of the scope of the section of the Bill, this was in fact defining an entry barrier for small business, one MP warned.

These submissions, he said, and probably many smaller but maybe developing entities, would see 51 or more employees as a problem zone and might wish to avoid the cumbersome administration of bureaucratic interventions.  This would most likely de-incentivise job creation, other MPs said, and they called for the Bill to cover all and sundry employers.   The application of BEE involved an ethic which applied to all in business and industry, it was said.

Some saw 50 as an arbitrary number and asked why this had been selected.

Overview

The Employment Equity Amendment Bill was first introduced by Minister of Labour, Thulas Nxesi, in July 2019, proposing a number of radical changes to equity law  seen then as essentially taking back what as a “voluntary” system of equity target setting by business and industry and substituting this with a system whereby the Minister runs the show, sets the targets and disciplines defaulters.

The Bill was considerably delayed by the spread of the Covid 19 pandemic, thus not contributing to the governing party’s policy of insistence on the speeding up of transformation, which issue was expressed as urgent at the last ANC conference. The “EE Bill” has been adopted as a major platform for Department of Labour policy and execution in the current period and the message clearly conveyed to Alliance MPs for the Bill to be in force by the end of 2021/22.

BEE Equity Bill to set targets – ParlyReportSA

B-BBEE included with Covid relief regs – ParlyReportSA

 

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