Business South Africa
20 July 1998

1. Business South Africa (BSA) supports appropriate policies to address imbalances caused by the policies of apartheid.

2. However, BSA is strongly opposed to those sections of the Bill that deviate substantively from agreements concluded in NEDLAC, which agreements represented considerable compromises on the side of business.

3. BSA also has a serious reservation about the insertion of a turnover threshold, and the consequent impact of the Bill on small business.

BSA supports the elimination of unfair discrimination, and supports the promotion of equal opportunity and fair treatment in the workplace. BSA is also mindful of the discriminatory practices which took place in the past under the previous government, and is aware that certain distortions were brought about as a result of the policies of apartheid. BSA is consequently of the view that appropriate policies are required to address these imbalances.

However, BSA at the same time believes that the measures which are adopted should take cognizance of the economic and financial circumstances of employers, the availability of appropriately qualified and skilled persons, the reasonable concerns of the investment community, and the need for the South African economy to remain competitive in the global world economy. Should the correct balance between measures to address past discrimination and economic imperatives not be attained, the job losses experienced in recent times will be considerably exacerbated.

BSA remains concerned that where complex and onerous obligations are placed on employers these will constitute further disincentives to foreign investors, will increase the hassle factor associated with the employment and upliftment of employees, and will constitute yet another disincentive to job creation. This in turn will encourage even higher rates of mechanization, and the consequent shedding of jobs.

SA business has to function in a competitive international environment - exacerbated by the currency turmoil that the world is experiencing and which has increased the competitive pressures for S A business. This is unlikely to ease in the medium-term. SA business has to be internationally competitive, not only because it exports, but also because we have to hold our own domestically against products and services which emanate from abroad. If we are not optimally able to arrange our own affairs we will be at a disadvantage to provide opportunities and jobs in our society.

At the higher skills level of senior management and professionals, the labour market has also become globalised. If one is not careful, inappropriate policy measures will lead to a situation where critically needed skills will leave the country and will also not be attracted to the country. This will have investment consequences for our country.

Small and medium sized employers are also a key success factor in stimulating growth and employment creation in the economy. Onerous administrative and substantive obligations on these enterprises will hamper them in this regard, as many do not have the necessary infrastructure, funds and expertise to contend with complex and burdensome labour regulation.

BSA is of the view that policies for redressing imbalances of the past should be imposed only for a limited period and not in perpetuity, as anti-discrimination legislation would in due course be sufficient to ensure equity, both in the workplace and beyond.

Turning to the Employment Equity Bill as an instrument to address the imbalances, BSA is distressed about the Bill in its present form, as it deviates in some critical respects from the agreements concluded during the NEDLAC negotiations.

Should the Bill be amended to reflect the NEDLAC agreement, BSA would be able to substantially support the Bill, although BSA also recorded some reservations in the NEDLAC report which need to be attended to. The concerns of BSA are outlined below.


1. Suitably Qualified Person (clauses 20(3) and (4))
The following wording was agreed in the NEDLAC negotiations (paragraph 15, 16 & 17 of NEDLAC report):

15. A new renumbered section 18(3) will be inserted as follows:

A person may be suitably qualified for a job as a result of any one of, or combination of, the following -

(a) that person’s formal qualifications;
(b) that person’s prior learning; and
(c) that person’s relevant experience.

16. A person without previous experience should not be discriminated against and that the legal drafters should incorporate this principle in the Bill, either by amending the new renumbered section 18(3) or by amending the definition of "suitably qualified" in section 61.

17. A new renumbered section 18(4) will be inserted as follows:

When determining whether a person is suitably qualified for a job, an employer must -

a) review all of the factors listed in subsection (3); and
b) determine whether that person has the ability to do the job in terms of any one of, or combination of, those factors.

Despite agreement on the definition of the term "suitably qualified person" in the NEDLAC negotiations, the drafters have modified the definition way beyond the parameters of what was agreed. The definition has now been materially altered in a way that will lead to compulsory tokenism and impose unrealistically onerous obligations on employers, with potentially devastating consequences for individuals and the economy.

In particular, the addition of the concept of potential (i.e. the "capacity to acquire the ability to do the job") as a basis for recruiting permanent staff and giving it equal status to "ability" is not acceptable. It is practically impossible to determine whether a person will at some time in the future acquire the ability to do the job. This will result in an obligation to employ persons who are not in fact suitably qualified, and this is in contravention of what was agreed during the NEDLAC negotiations. The concept of potential is not rejected, but it is appropriate only in the context of appointing trainees or cadets.

The wording in the NEDLAC agreement was already a significant compromise for employers, as it simply requires that the person must have the "ability to do the job", not that he or she should be the best person for the job. As every employer who is striving for excellence would know, there could be a large difference between the two concepts.

Due to the uncalled for amendment to the definition agreed in NEDLAC, employers will now not only be unable to appoint the best person for the job, but might have to appoint persons whose ability to perform a particular job is at best suspect. This will have a very negative effect on productivity and will add considerably to employee costs. It will consequently discourage investment and employment.

Furthermore, the effect of the revised wording is to discount and supersede the requirements of formal qualification, prior learning or relevant experience, in favour of capacity to acquire the ability to do the job, which is substantially in breach of what was agreed in NEDLAC.

The drafters seem to have confused the concepts of "capacity" and "experience". Whereas they had a mandate to look into the issue of
previous experience, they have gone beyond that mandate and have included the concept of capacity (potential ability to do the job) in contravention of the provisions of the NEDLAC report.

Any concerns about employers imposing unnecessarily demanding criteria relating to experience in determining the requirements for a particular job, are more than adequately addressed by the following:

• the provisions of clause 6 of the Bill, which prohibits unfair discrimination on any grounds whatsoever, and this includes experience;

• the wording of the proposed clause 18(4) of the Bill, which provides that a person might have the ability to do the job solely on the basis of, for instance, prior learning.

The revised definition is not in the interests of anyone, least of all the historically disadvantaged. It will have extremely negative ramifications for the economy, and must be reconsidered.

BSA is strongly opposed to the new wording and consequently calls for the re-insertion of the original agreed wording into clause 20 of the Bill.

2. Wage Gap (clause 6(4))
After considerable effort and many hours of delicate negotiations, government and business representatives in NEDLAC were able to agree upon a ‘wage gap’ clause which read:

"Where instances of unfair discrimination occur in relation to wage differentials, employers must attempt to address these in a manner appropriate to their circumstances, which may include collective bargaining or other measures such as those provided for in the Basic Conditions of Employment Act 75 of 1997."

However, the wording of the Bill has now been modified to a point where business can no longer support the provision. There are numerous problems with the refashioned wording. For instance, collective bargaining is now indicated as the first and therefore paramount measure to address such discrimination. This implies a duty to bargain, which was strenuously avoided in the Labour Relations Act. Furthermore, it is unclear what is meant by "other bargaining". In addition, there is a substantial difference in saying ‘an employer must address….’ rather than saying ‘where instances of unfair discrimination occur, employers must address…’.

BSA consequently calls for the re-insertion of the original agreed wording into clause 5(4) of the Bill.

3. Reporting Obligations (clause 21)
The original Bill contained a footnote to the clause regulating the report, (now clause 21) which provided that

"…the first report will relate to the initial development of and consultation around an employment equity plan. The subsequent reports will detail the progress made in implementation of the employment equity plan."

Although footnotes have been included in other parts of the Bill, this crucial footnote has been left out. BSA calls for the reintroduction of this footnote, as it provides vital guidance to persons entrusted with the implementation of the Bill, especially in the light of the considerably reduced reporting time periods. BSA only supported the reduced time periods on the strength of a requirement for a much simplified first report.

4. Punitive Damages (clause 49(2)(c))
Clause 49(2)(c) of the latest draft of the Bill still empowers the Labour Court to impose punitive damages, even though it was agreed during the NEDLAC negotiations that punitive damages would be deleted subject to legal advice.

BSA procured an opinion from senior counsel, at considerable expense, which indicated that the concept is foreign to South African law, and submitted a copy to Government. Despite this, Government have failed to address the issue, and BSA calls for this oversight to be corrected.

5. Codes of Good Practice (clause 53)
It was agreed during the Nedlac negotiations that the Minister could issue codes of good practice "on the recommendation of the Commission and after consultation with NEDLAC…".

Despite agreement on this issue, this wording has been omitted, and BSA calls for the statute to reflect what was agreed during the NEDLAC negotiations on this issue.

6. Regulations (clause 54)
During the NEDLAC negotiations the parties agreed that the Minister may make regulations "…on the recommendation of the Commission and after consultation with NEDLAC…".

Despite agreement on this issue, this wording has also been omitted, and BSA calls for the Bill to reflect what was agreed during the NEDLAC negotiations on this issue.

7. Deletion of the words "designated employer"
The words "designated employer" have been deleted from clauses 35(1), 35(2), 36(1), 36(3), 36(4), 36(5), 36(6), 38(6), 39(1), 39(2) and 39(3), (even though they have been retained in clause 38(5)), despite the lack of any agreement in NEDLAC to this effect.

This creates unnecessary inconsistency and uncertainty, and it is proposed that the original wording be retained in the Act, particularly in section 35(1).


8. Definition of Designated Employer / Removal of Turnover Threshold (clause 1)
The statute was originally intended to apply to employers of 50 or more employees, but during the negotiations a turnover threshold was inserted. Business indicated that many of its members have reservations with the insertion of a turnover threshold. BSA believes this will have the effect of causing administrative chaos in government by bringing an untold number of small and even micro business into the fold. This will make the Act impossible to implement, will cause many employers to disregard the law, and will bring it into disrepute.

Turnover is not equal to administrative capacity or profitability. A company may have a reasonable turnover, but may have very few employees and may make little or no profits. Such a company will simply lack capability and capacity to implement affirmative action. Employers with very few employees will have great difficulty in complying with the Act, even if their turnover is high. Businesses which consist solely of family members will have very serious difficulty in implementing affirmative action. Furthermore, smaller businesses often have limited funds, and are not in a position to "carry" extra persons who are still in a process of coming up to speed with regard to their productive contribution.

The threshold will act as a disincentive to small entrepreneurs who are the principal job creators, will increase the hassle factor associated with labour, will increase levels of mechanization, and might cost the state millions in lost revenue as these companies are induced to under-disclose and conceal income to avoid obligations to which they are not suited, and which they do not have the resources to bear. In a country already struggling with job loss, disincentives of this nature should be strenuously avoided.

9. Forum Shopping and Clause 45
9.1 It was agreed during the NEDLAC negotiations that this clause would be amended as a consequence of the deletion of clause 24. However, despite the deletion of clause 24, clause 45 has been inadequately amended and still allows for forum shopping. The revised clause 45 allows parties to simultaneously refer a dispute which arises under Chapter II to either the CCMA (clause 10) or the Director General (clause 42), or both.

9.2 Clause 45 provides that where an applicant refers a Chapter II dispute both to the CCMA and to the Director General, the CCMA proceeding are only stayed until the matter is determined by the Director General.

9.3 Furthermore, clause 45 only refers to the situation where a dispute has been referred to the CCMA after the procedures in clauses 42 to 44 have been invoked. The clause does not cater for the situation where review proceedings are instituted after a dispute has been referred to the CCMA.

9.4 As clause 45 is currently worded, different forums may provide different outcomes to the same issue, and the Bill needs to be amended as follows:

(a) delete clause 45; and
(b) amend clause 42(1) to read as follows:

"The Director General may conduct a review to determine whether a designated employer is complying with this Act."

9.4 This will eliminate the problem of overlapping jurisdictions, and will ensure that Chapter II disputes are correctly dealt with in terms of the dispute resolution measures mentioned in clause 10.


10. Typographical Errors
Clause 49(1)(f) has a colon after the word "Act", which needs to be removed.

11. Turnover Threshold Ambivalence
Subject to our reservation set out in paragraph 8 above there appears to be uncertainty regarding the interpretation of the wording relating to the threshold, in particular the fact that the word ‘minimum’ could have unintended consequences.

To remove this uncertainty (i.e. if the principle of a threshold is retained) clause 1 could be amended as follows:

"designated employer" means -

a) a person who employs 50 or more employees;
b) a person who employs fewer than 50 employees, but has a total annual turnover that is equal to or above the applicable annual turnover of a small business in terms of the schedule to the National Small Business Act 1996 (Act 6102 of 1996).
c) (as is)
d) (as is)

12. Inherent Requirements of the Job
Chapter 3 of the Bill does not make provision for "the inherent requirements of the job" as a criterion that must be considered in terms of section 41(a). The concept of "inherent requirements of the job" is recognized by Clause 2 of Article 1 of ILO Convention 111 of 1958, and is included in Chapter 2 of the Bill. However, it is also required in Chapter 3 and this was not realised during the NEDLAC negotiations. In assessing whether designated persons are equitably represented, regard should also be had to the fact that the inherent requirements of the job might have an impact on persons being equitably represented. Considerations of decency or privacy might, for instance, require workers of a certain sex. Physiological considerations or reasons of aesthetics or authenticity might also be relevant.

BSA consequently calls for the insertion of "the inherent requirements of the job" as a new clause 41(a)(vi).

Community Law Centre: Women & Human Rights Project


Prepared by: Michelle O'Sullivan