Big storm brewing over South Africa’s new BEE targets: legal experts

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2023-05-17 at 22:14 #405027
Nat Quinn
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The Minister of Employment and Labour has published the much-anticipated notice identifying proposed national economic sectors and employment equity numerical targets under the Employment Equity Act (EEA).

The proposed targets have been instantly controversial, and are likely to draw contestation from various sectors for years to come, say Imraan Mahomed, Director of Employment Law practice and JJ van der Walt, Senior Associate at Cliffe Dekker Hofmeyr (CDH).

The legal experts said that the introduction of targets is a significant move because there have, up to this point, been no numerical targets in South Africa underpinning affirmative action.

This is a particularly controversial move by the government because racial quotas are unlawful in South Africa. While the new proposals are technically “numerical targets” – something which is acceptable in law – companies now run the risk of crossing over from one to the other.

The new numbers

Broadly, the proposed targets appear to push companies to be more demographically representative, especially in top and senior management positions.

The department did not, however, publish an explanatory note with the gazette explaining how the targets are to be read.

The tables instead show a barrage of percentages split across:
- 18 industries/sectors
- 4 skill levels per industry (Top management; Senior management; Professional; Skilled)
- 4 racial groups per skill level (plus a total for “Black”, which includes Indian, Coloured and African)
- 2 genders (Male; Female)
- 10 regional breakdowns for all of the above (9 provinces and national).
Each sector breakdown features a workforce profile for 2022, which is ostensibly what the targets are set against, although this is not explicitly stated.

The Notice determines demographics as follows:
- The “National EAP” applies to employers “conducting their business/operations nationally”.
- The “Provincial EAP” applies to employers “conducting their business/operations in a particular province”.
- Employers cannot use the national-and provincial demographics (EAP) at the same time.
- Designated employers must choose one demographic (i.e, either national or provincial) and utilise the chosen demographics for the duration of the employment equity plan (the “EE Plan”) that is in line with the 5-year sector targets.
Employers must also implement the 5-year numerical goals and annual targets set out for Semi-Skilled and Unskilled levels in the EE Plans, which are not covered by the sector targets, by utilising the same demographics of the EAP that they have chosen, whether national or provincial.

These are difficult decisions that have to be made, which cast a shadow for five years in the life of an enterprise, the legal experts said.

A quota by any other name?

The legal experts noted that the implementation of the amendment to the EEA sharply raises the distinction between numerical targets and quotas, and warned employers to be aware of the distinctions – because the former is lawful whilst the latter is unlawful.

“Our law provides that an EE Plan may provide for preferential treatment and numerical goals, but not quotas. The Constitutional Court has already made it clear that an EE Plan must be properly formulated and not simply a tick box exercise, and it must be applied in a lawful manner by an employer,” they said.

The primary distinction between numerical goals/targets and quotas lies in the flexibility of the standard.

Quotas amount to prohibited job reservation, and this was jettisoned with apartheid. Numerical targets, however, are intended to serve as flexible employment guidelines.

“The Constitutional Court has already stated that the Constitution does not take issue with EE Plans that rigidly allocate positions along the lines of race and gender, provided that the EE Plan provides for certain specific deviations or exclusions.

“So, an EE Plan may deviate where a candidate has scarce skills or based on the operational requirements of the employer. A designated employer need only provide for limited flexibility; that is a deviation from its general application,” the experts said.

However, the Constitutional Court also made it plain that an EE Plan can be validly adopted but unlawfully implemented.

“This often occurs in the real world. If the EE Plan is ‘rigidly’ implemented, the implementation of the EE Plan can render a validly formulated numerical target a prohibited quota. This means that an employer can be challenged on the basis that the target became a quota – which, as we know, is unlawful.”

“The minimum standard that must be applied when determining whether the implementation of numerical targets is valid is based on whether it is rational.

“The EE Plan can only be implemented for its lawful purpose and nothing else. Once it is rigidly applied, it can hardly be said to be a measure that is being used as one designed to achieve or promote the achievement of equality, which is the ultimate objective of affirmative action measures,” the experts said.

An employer, accordingly, cannot blindly follow numerical targets without due regard for the purpose of the achievement of equality.

This is done by inflexibly appointing applicants in ‘dogmatic compliance’ with the numerical targets of the EE Plan. This would render the targets quotas.

“We anticipate that this will become very contested terrain in affirmative action law in years to come,” the lawyers said.

Challenges inbound

There has already been an indication that the numerical targets will face a constitutional challenge, the experts noted. In addition to this, the proposals themselves have left groups scratching their heads.

Business interest group Sakeliga said that the numbers were irrational and incomprehensible – while Mahomed and Van der Walt have also flagged some issues.

“The notice, on occasion, determines a numerical target of 0%. In the Agriculture, Forestry, and Fishing sector in Limpopo for instance, the numerical target for both coloured-males and females is 0%.

“A target of 0% can neither ‘target’ nor be designed to protect or advance anyone in our view. It is meaningless,” they said.

They highlighted that the notice is also silent on the meaning of “conducting their business/operations nationally” and seems to be plagued in part by irrationality by limiting a designated employer that conducts its business/operations nationally to only the national EAP.

“This aside, employers now need to be alive to the reality that the targets have been proposed and that what has been mooted by the DEL for a number of years is on the horizon to soon becoming real in the near future,” they said.

source:Big storm brewing over South Africa’s new BEE targets: legal experts (businesstech.co.za)
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The Minister of Employment and Labour has published the much-anticipated notice identifying proposed national economic sectors and employment equity numerical targets under the Employment Equity Act (EEA).

The proposed targets have been instantly controversial, and are likely to draw contestation from various sectors for years to come, say Imraan Mahomed, Director of Employment Law practice and JJ van der Walt, Senior Associate at Cliffe Dekker Hofmeyr (CDH).

The legal experts said that the introduction of targets is a significant move because there have, up to this point, been no numerical targets in South Africa underpinning affirmative action.

This is a particularly controversial move by the government because racial quotas are unlawful in South Africa. While the new proposals are technically “numerical targets” – something which is acceptable in law – companies now run the risk of crossing over from one to the other.

The new numbers

Broadly, the proposed targets appear to push companies to be more demographically representative, especially in top and senior management positions.

The department did not, however, publish an explanatory note with the gazette explaining how the targets are to be read.

The tables instead show a barrage of percentages split across:

18 industries/sectors

4 skill levels per industry (Top management; Senior management; Professional; Skilled)

4 racial groups per skill level (plus a total for “Black”, which includes Indian, Coloured and African)

2 genders (Male; Female)

10 regional breakdowns for all of the above (9 provinces and national).

Each sector breakdown features a workforce profile for 2022, which is ostensibly what the targets are set against, although this is not explicitly stated.

The Notice determines demographics as follows:

The “National EAP” applies to employers “conducting their business/operations nationally”.

The “Provincial EAP” applies to employers “conducting their business/operations in a particular province”.

Employers cannot use the national-and provincial demographics (EAP) at the same time.

Designated employers must choose one demographic (i.e, either national or provincial) and utilise the chosen demographics for the duration of the employment equity plan (the “EE Plan”) that is in line with the 5-year sector targets.

Employers must also implement the 5-year numerical goals and annual targets set out for Semi-Skilled and Unskilled levels in the EE Plans, which are not covered by the sector targets, by utilising the same demographics of the EAP that they have chosen, whether national or provincial.

These are difficult decisions that have to be made, which cast a shadow for five years in the life of an enterprise, the legal experts said.

A quota by any other name?

The legal experts noted that the implementation of the amendment to the EEA sharply raises the distinction between numerical targets and quotas, and warned employers to be aware of the distinctions – because the former is lawful whilst the latter is unlawful.

The primary distinction between numerical goals/targets and quotas lies in the flexibility of the standard.

Quotas amount to prohibited job reservation, and this was jettisoned with apartheid. Numerical targets, however, are intended to serve as flexible employment guidelines.

“The Constitutional Court has already stated that the Constitution does not take issue with EE Plans that rigidly allocate positions along the lines of race and gender, provided that the EE Plan provides for certain specific deviations or exclusions.

“So, an EE Plan may deviate where a candidate has scarce skills or based on the operational requirements of the employer. A designated employer need only provide for limited flexibility; that is a deviation from its general application,” the experts said.

However, the Constitutional Court also made it plain that an EE Plan can be validly adopted but unlawfully implemented.

“The minimum standard that must be applied when determining whether the implementation of numerical targets is valid is based on whether it is rational.

An employer, accordingly, cannot blindly follow numerical targets without due regard for the purpose of the achievement of equality.

This is done by inflexibly appointing applicants in ‘dogmatic compliance’ with the numerical targets of the EE Plan. This would render the targets quotas.

“We anticipate that this will become very contested terrain in affirmative action law in years to come,” the lawyers said.

Challenges inbound

There has already been an indication that the numerical targets will face a constitutional challenge, the experts noted. In addition to this, the proposals themselves have left groups scratching their heads.

Business interest group Sakeliga said that the numbers were irrational and incomprehensible – while Mahomed and Van der Walt have also flagged some issues.

“The notice, on occasion, determines a numerical target of 0%. In the Agriculture, Forestry, and Fishing sector in Limpopo for instance, the numerical target for both coloured-males and females is 0%.

“A target of 0% can neither ‘target’ nor be designed to protect or advance anyone in our view. It is meaningless,” they said.

They highlighted that the notice is also silent on the meaning of “conducting their business/operations nationally” and seems to be plagued in part by irrationality by limiting a designated employer that conducts its business/operations nationally to only the national EAP.

“This aside, employers now need to be alive to the reality that the targets have been proposed and that what has been mooted by the DEL for a number of years is on the horizon to soon becoming real in the near future,” they said.