Emerging Business Front

It is widely accepted that there has to be job creation in the formal sector; also, that the undertakings best placed are those commonly referred to as small to medium sized enterprises (SMEs). We submit that the Employment Equity Bill, if passed into law its present form, would place a burden on SMEs that would lessen their effectiveness as job creators and as contributors to the fiscus and national wealth overall.

The introduction to the Bill is devoted in part to economic growth. It says that the upgrading of skills and improved access to jobs will make for more productivity and efficiency. We find no fault with that argument, but we fail to see how a new law in itself can alter the fact that jobs are disappearing at an alarming rate. The effect of the Act would merely be to displace one person in favour of another, in the process creating an extra load of administration and cost, which in turn would further inhibit job creation.

Administrative obligations as set out in Section 16 - 20 of the Bill would impose a burden that only the largest businesses could bear. It would be almost impossible to meet these requirements with at least one person devoting half his working day to them. Large co -operations may be able to employ full-time people for the job; small companies cannot.

Among other points to be looked at in relation to the resources available to SMEs, is the time limit on referral of disputes to the CCMA. Section 6 provides for a matter of unfair discrimination to be referred within 12 months after the Act or omission. This is far too long: it is difficult for the SME to keep proper track of the dispute over such a period.

A further difficulty is the CCMA itself, which has publicly said that it is overburdened and underfunded; the record shows that parties have waited for up to six months after disputes have been through the conciliation process for arbitrations to take place. We suggest that either the CCMA be 'beefed up" or an auxiliary body/ies formed.

In parts the Bill strikes us as poorly drafted. For example:

1) Section 5 duplicates provisions of Labour Relations Act. This creates an extra avenue for litigation which, in turn, because of extra time and expense involved, creates opportunities for exploitation: for example, an aggrieved employee could, by threatening to go to both the CCMA and Labour Court if necessary, force the employer to "buy him/her off" so as to avert the process.

2) In obliging a business to state numerical goals for achieving equitable representation of people of designated groups within every occupational category and at every level of the workforce, the Bill conflicts with its own Section 12 (3) (a).

3) Section 5 prohibits discrimination on grounds of race - as does the Labour Relations Act. In practice, however, it would be almost impossible for employees to take on blacks, coloureds, Asians, women or people with disabilities without discriminating against white men.

4) Too many of the concepts (e.g. "reasonable") are poorly defined and open - ended. For example, it is not clear what by full a consultation process. Whilst in principle consultation processes make good business sense, they are notoriously time- consuming. Should one not at least be told how many meetings have to take place over what period of time for the action to qualify as having met the requirements of the law?

Legislation for affirmative action has traditionally been aimed at protecting the interest of the minorities. But in this case the legislation seems to be aimed at social engineering. Indeed, we find it significant that organised labour has NOT been particularly vocal in its support of this Bill. Could it be that labour recognises the Bill for what it is: racially discriminating?

In the introduction to the Bill the reader is alerted to the ratification of ILO Convention iii concerning discrimination in respect of employment and occupation. The introduction goes on to say that, in aiming to bring about equality of opportunity and treatment, the Bill is in line with that Convention. But it ignores what in our views is the significant point Article 5 of the Convention: whilst it refers to groups specifically prejudices by legislation and practice, it rules out measures to protect particular groups.

We cannot stress too strongly what international experience and research has shown:
that affirmative legislation interferes with the workings of the labour market and invariably has adverse economic effects.

Last but not least of our concerns are the sweeping powers given to the Minister by the Bill. If, as one assumes, his discretion is largely informed by deliberations within NEDLAC, we should point out that NEDLAC does not have adequate reference to SMEs. On the other hand, experience has shown that even if a body like NEDLAC cannot come to any decisions, the Minister can take Legislation to Parliament purely on the basis of sufficient consensus.

The dangers of vesting wide powers in members of the Cabinet show up clearly in the history of apartheid. The least that should happen before the Bill becomes law is the amendment of its General Provisions, particularly Sections 50 - 52.


1) Definition of "designated employer"
Raise the figure relating to the number of persons employed from 50 to at least 100. (The South African chamber of Business has called for the figure to be raised to 250, saying that "the more onerous the legislative requirements, the higher this cut - off must be".)

2) Powers of the Minister
Curtail the Minister's power to summarily amend, add to or extend any provisions of the Act including the definition of" designated employer"

3) Timing of the legislation
Delay implementation of the Act until it can be proved that there has been a rise in the economic growth rate and that job opportunities have increased as compared with the present shrinkage.

4) Sunset clause
Insert a clause to the effect that, as and when certain criteria have been met, the legislation will become null and void or be removed from the statute books.

5) Duplication
Remove from the Bill everything relating to unfair labour practice already covered in the Labour Relations Act

6) Concept definition
Clearly indicate what is meant by terms like measures", "reasonable", "suitably qualified/ trained/ developed" ect.

7) Time limit for referral of disputes
Shorten the period within which the disputes must be referred to the CCMA from 12 months after the act or omission to 30 days.

8) Referral body
Provide alternatives to the CCMA

9) Duties of designated employers
i) Define the consultation process in terms of number of meetings over a certain period of time, ect.
ii) confine the duty to collect and analyse information to businesses of 1 000 employees or more.
iii) confine the requirements i.r.o. Employment Equity Plans to businesses of 1000 employees or more; alternatively, draw up a generic Equity Plan for smaller businesses
iv) For businesses having fewer than 500 employees, change the frequency of reporting from annual to three- yearly.

10) Exemption
Exempt emerging businesses from provisions of the Act in its entirety for a period of five years from their inception.


The Department of Labour have penned the Employment Equity Bill, which if passed in its entirety will amount to the most draconian social engineering Since Apartheid. It is strange to note that although the Bill has been debated at Nedlac, and is still in the throes of such a debate, that the public and the employers have been rather quiet to say the least.

At the outset the Minister has published a note as follows:

"Apartheid has left behind a legacy of inequality reflected in disparities in the distribution of jobs, occupations and income. The Government is of the view that it is necessary to redress these imbalances and to inculcate within every workplace a culture of non-discrimination and diversity. When it comes to jobs, training and promotion we want a fair deal for all workers."

However the Bill goes on m various chapters to enforce various duties which go beyond the mere removal of obstacles to jobs, training and promotion.

The Bill outlines that the positive measures in terms of Section 12, such as
1. The employer must include making reasonable accommodation of people from designated groups, to ensure that these groups enjoy equal opportunities and are equally represented in the workforce of a designated employer;

2. The employer must include affirmative action measures including preferential treatment to appoint and promote suitably qualified people from designated groups, to ensure their equitable representation in all occupational categories and levels in the workforce;

3. The employer must include measures to retain, train and develop people from designated groups. The designated groups have been defined as: "black people, women and people with disabilities". In the definition of the Act Black people are defined as Africans, Coloureds and Indians.

The very cornerstone of the legislation is to make provision for positive measures to promote a diverse and representative workforce and even although the introduction to the Bill does alert the reader to the need for economic growth and the introduction does try to argue that legislation of this nature will lead to this economic growth it is submitted that the argument is absolutely spurious and certainly does not enhance efficiency in any way. The introduction also alerts the reader to the ratification of the ILO Convention No.111, concerning the discrimination in respect of employment and occupation. However, the introduction goes on to argue that legislation of this nature which aims to achieve equality of opportunity and treatment is in line with this ILO Convention. Even though Article 5 of the Convention does exclude special measures of protection of certain Groups, Article 5 does aim at Groups that are specifically excluded by Legislation and Practice.

The proposed Equity Bill has taken Affirmative Action Policies and made them compulsory within businesses who have over 50 people employed. Furthermore, a new rather radical innovation to this Bill has been the debate around a turnover clause as opposed to the number of employees. It is our submission that the Minister plans to include every business within the jurisdiction of this Bill, regardless of its turnover or size.

Although Nedlac has actively taken part in the debate surrounding the merits or otherwise of the Bill, it is suggested that Nedlac will not have adequate reference to Small Business or Emerging Business. Furthermore even if Nedlac cannot come to any decisions history has told us that the Minister can take the Bill to Parliament on
"sufficient consensus

It has been interesting to note that organised labour have not been vociferous over its support on this Bill and we might be so bold as to state that they have recognised it as being racially discriminatory.

It is quite clear that the only real result of social engineering of this nature will lead to the encouragement of the employment of Blacks, Coloureds, Indians, Women or people with disabilities by legal racial discrimination against Whites.

This, even although the Labour Relations Act and Section 5 of the Bill have a distinct prohibition against unfair discrimination on the grounds of race.

Obviously it would be desirable to increase employment opportunities for people from the designated groups and people with disabilities. The real issue is how to increase those employment opportunities without actually impinging on the rights of those who are not part of the designated groups. It is argued that legislation of this nature does not increase employment opportunities at all but merely creates further administrative spending and further destruction of employment opportunities. It is quite clear that small business, when faced with another piece of employment legislation will have to go back to the drawing board to enquire as to whether the utilisation of capital is viable or not. Government has often said that they would not bend to threats of this nature and that should business wish to invest elsewhere they may do so. But it is certainly not an argument to rush into legislation of this nature if international research tells us Affirmative Action Legislation has to be carefully monitored and should not over regulate the labour market.

The areas of the Bill such as monitoring and enforcement will merely create more costs for both the State and for Business and in particular certain recommendations could be made to the Minister before the implementation of a Bill of this nature.

It has been argued that labour legislation that is appropriate between large employers and the large Trade Union is certainly inadequate when it comes to small business. If the Minister and Government is absolutely adamant about the promulgation of the Employment Equity Bill, then certain recommendations are imperative to be taken into account so as to enable the survival of small business in South Africa.

Suggestion No.1:
It is suggested that the definition of designated employer be amended to mean a person (which includes a legal persona), who employs over 100 employees. The definition as it currently stands is 50 employees or more. However, the Minister has the power to amend thi3 at a later stage to lesser employees or to amend it to cover businesses who have a certain amount of turnover. It should be noted that the South African Chamber of Business has called for the criteria for a designated employer to be increased from 50 to 250 employees and they state as follows:

"The more onerous the legislative requirements, the higher this cut-off point must be."

It must also be borne in mind that there must be more creation of jobs in the formal sector and that small and medium business has the ability to create these jobs. If however the Employment Equity Bill is passed this will place further costs on small business who would certainly not then be able to grow.

Suggestion No.2:
The implementation of tile Bill could be frozen until after the Government can show an improvement in the economic growth rate and proof that employment opportunities have started growing as compared to the present shrinkage of the market.

The introductory chapter of the Bill has an entire portion on economic growth. Although it is argued that a Bill of this nature enhances economic growth
it is entirely unclear as to how this will help in any way. The argument is that the upgrading of skills and the improvement of access to the jobs will allow people to achieve maximum productivity and efficiency. However, due to the fact that there has been no job creation and the fact that the economy is stagnating means that you will merely replace one person with another and in the process create enormous administrative and training costs. These costs in turn will create further suppression of job creation.

Suggestion No 3:
If however the Department of Labour is absolutely "hell-bent" on enforcing the promulgation of the Bill then it is suggested that a "sunset" clause be placed in the Bill.

There is nothing in the Bill to indicate that legislation of this nature will come to an end on a certain date or at a certain stage. If in fact the legislation is truly there to redress the imbalances of the past, it is suggested that when certain criteria have been reached then the legislation should become null and void or be removed from the statute books. It should be noted that Affirmative Action legislation has always been there to protect the interests of minorities, but due to our strange previous social engineering, the legislation is now to be introduced to protect the majority.

Suggestion No 4:
The administrative obligations of Sections 16-20 of tile Bill should be reserved purely for Companies employing over 1,000 people.

These administrative obligations seem to be absolutely draconian. It will be almost impossible to fulfil these obligations without a specific individual at least dedicating half his employment day to fulfilling the obligations properly. It is suggested that the larger corporations may be in a position to actually employ a full time person for the fulfillment of the obligations, but smaller companies certainly cannot afford same. The costs of these obligations will merely retard the employment opportunities for others.

Suggestion No 5:
The unfair discrimination clauses should be removed from this Bill and left to tile Labour Relations Act.

In terms of Section 5 of the Bill, it appears that the legislation is duplicated with the Labour Relations Act. This will create enormous difficulties in terms of litigation, either at the CCMA or the Labour Court. It also means that employees can bring a law-suit against the Company if they believe that the Company has not
followed the spirit of the Employment Equity Legislation. Legislation such as this opens the door to every disgruntled employee to embark on the litigation process hoping for an economic reward from the Company1 so as to enable the Company to avoid litigation. Once again this will create an enormous cost to the running of Small Business and will probably be seen as the death knell of Small Business.

Suggestion No.6:
The definition of words such as measures and reasonable must be clearly outlined so as not to create wide interpretation.

The Act in terms of Sections 10, 12 and 24 uses open ended clauses which history tells us could lead to years of litigation before proper definitions are settled upon. This is certainly not the correct way to legislate and nor is it the correct way to encourage job creation.

Suggestion No.7:
Disputes in terms of tile Legislation must be referred to the CCMA within 30 days after tile date of tile dispute.

In terms of the legislation, Section 6 allows a party to refer the dispute, constituting unfair discrimination within 12 months after the act or Omission. A period of 12 months is seen as enormous in the scheme of things and it becomes impossible for a small business to be able to know exactly where it stands in terms of any disputes to be referred to the CCMA.

Suggestion No.8:
Disputes should be referred to a new body and not tile CCMA. The CCMA has already publicly stated that it is overburdened and underfunded. It is on record that parties are waiting up to six months for arbitration to take place after the disputes have been through the conciliation process.

Suggestion No.9:
The duties of tile designated employers should not be onerous to tile extent that a full time person must be employed for those duties.

In terms of Section 10, duties of consultation, preparation and reporting are placed on the designated employer. It is notorious that the consultation process can take many months and that this could be the death knell of small employers. It is suggested that if the Government does require the full consultation process to take place, that the consultation process be carefully defined as meaning a certain number of meetings for a certain period of time.
Suggestion No.10:

The positive measures outlined in tile Bill be more clearly defined.

The words such as reasonable, suitably qualified, trained and developed have been used. It is suggested that these words be carefully outlined and defined before the Courts try and define these post facto.

Suggestion No.11:
The analysis needed by tile Legislation should be reserved for companies of 1,000 employees or more.
It appears that the collection of information and the conducting of the analysis will be an enormous task. The Minister will in fact be issuing regulations concerning the conduct of this analysis, but it is suggested that Small Business cannot cope with tasks of this nature without causing the retardation of job creation.

Suggestion No.12:
It is suggested that the Employment Equity Plan be reserved purely for businesses of 1,000 employees or more.

An Equity Plan must be prepared and implemented in terms of the Bill, which in turn will create an enormous waste of manpower in small business. One of the suggestions has been to try and have a generic Equity Plan for small business without the small business being involved of the preparation of same. However, before a plan of this nature is prepared, it must take into account the vagaries of small business.

Suggestion No.13:
The Equity Plan should not have numerical goals.

One of the most hideous pieces of the Legislation is the forcing of business to state numerical goals in order to achieve the equitable presentation of people from designated groups within each occupational category and level in the workforce. The Ministry even goes on to say that it is in fact going to publish guide-lines regarding the factors to be taken into account in determining these numerical goals. It is quite openly submitted that this flies in the face of Section 12.(3)(a).

Suggestion No.14:
The reporting process should not be done on an annual basis but for businesses less than 500 employees it should be done every three years.

The reporting must be done to the Director General in a prescribed format. This format will require an enormous amount of input and it is suggested that small business be granted a longer period of time in which to make these reports.

Suggestion No.15:
It is suggested that emergent business be granted exclusion from the Act in its entirety for a period of five years from inception.

In order to enable business to grow and establish itself, it is suggested that the less retardation the better. it is quite clear that regulations of any nature stunt the growth of business.

Suggestion No.16:
It is suggested that disputes with regard to tile Legislation be simplified to tile extent that they are done on an informal scale.

It is notorious that disputes in terms of the legislation require enormous input of management time in order to try and settle them. These disputes will in turn place enormous burdens on small business who could other wise use their capital for job creation.

Suggestion No.17:
It is not entirely clear whether a contravention of tile Act constitutes a civil or criminal offence.

The very essence of the Labour Legislation is to move away from the criminal embargoes.

Suggestion No.18:
It is suggested that any code of good practise or any changes should be left to tile Legislature and not tile Minister.

The Ministerial decree takes away all powers of the Legislator and can basically change the Act without the proper consultation process.

Compiled by Mr Michael Bagraim and Mr John Fortuin