MICHAEL CARDO: New employment equity bill is a weapon of economic mass destruction

The Employment Equity Amendment Bill is a job-destroying jackhammer. It is a blunt and brutal tool handed carelessly to the employment and labour minister so that he (or she) might mould the workforce into a shape the governing party deems racially acceptable.

The ANC contends that the proposed new law is a weapon of transformation. In truth, it is a weapon of economic mass destruction. Its repercussions will reverberate for generations to come; unwelcome aftershocks to an economy already in upheaval.

There are two fatally flawed clauses in the bill. First, clause 4 introduces section 15A into the act, which empowers the employment and labour minister to identify national economic sectors and then determine numerical employment equity targets for these sectors. The requirements for consultation imposed on the minister are vague and ill-defined.

In this way the ANC seeks to foist its narrow, ideologically driven goal of “demographic representivity” from the minister above onto biddable employers below. This is the warped notion that the workforce should mirror exactly the racial and gender composition of the economically active population.

This new provision confers upon the minister a set of arbitrary and discretionary powers that are wholly incompatible with the drivers of a market-based economy. There is a simple word for rigid racial targets determined by the minister, thrust upon employers after a thin veneer of consultation and backed by punitive measures for noncompliance. In effect, they are quotas.

Second, section 53 of the principal act now comes into operation as amended by clause 12 of the bill. Henceforth, state contracts will only be awarded to employers who are in possession of a compliance certificate issued by the minister. To obtain the certificate an employer must have complied with any sectoral target set by the minister in the first place.

All of this is a recipe for malicious ministerial meddling. The bill concentrates powers in the hands of the minister, which might be used capriciously to benefit selected companies in the allocation of state tenders. This is a textbook ANC manoeuvre. It allows the governing party to manipulate outcomes — by rigging tenders or funnelling contracts — in the guise of righting past wrongs and redressing racial inequalities.

Yet, after more than two decades of employment equity and BEE legislation, it is clear that these legislative linchpins of racial transformation are really a fig leaf for crony enrichment.

What is driving this racial mania? The ANC looks at the upper echelons of management in the private sector — as opposed to the public sector — and gasps in horror at their complexion. There are too many whites. Able-bodied coloureds are overrepresented here, African women with disabilities are underrepresented there. So the governing party has come to the conclusion that the government should shift workers around as if they were pawns on a chess board.

In fact, it has gone one step further. It now seeks, through diktat, to conjure an entirely new chessboard into existence. However, that is not how societies or economies function. If the ANC wants to level the playing fields or broaden economic opportunity, it should increase the pool of available skills by putting in place a first-rate education system. It should foster conditions conducive to economic growth that allow for opportunities to flourish. But that is not how the governing party thinks.

The Employment Equity Amendment Bill is, to recall Tony Leon speaking on the original legislation, a “pernicious piece of social engineering”, pious in intention but destructive in effect. It will sow economic destruction. That is what happens in a command economy when a politician hauls out a racial abacus and declares how many beans should be in each row and what colour they should be. As it is, our economy is mangled — damaged and deformed by decades of ANC policy incoherence, state capture and corruption. It has been disfigured further by Covid-19 and the stringent lockdowns.

The numbers are well known. In 2020 economic activity slumped 7%, the biggest annual fall since 1946. We are still trapped in the longest downward cycle since World War 2. The economy has not grown by more than 3% annually since 2012. Last year there were more than 1-million job losses. Our unemployment rate sits at 44.4% on the expanded definition. Almost 12-million people do not have jobs.

A huge flight of skills and capital is under way. Desperate, anxious, middle-class South Africans of all races are rushing for the boarding gates to put daylight — and continents — between themselves, their families and a government that seems intent on a path of economic ruin through policies such as expropriation without compensation.

The new employment equity legislation will hasten that destruction. It will deter investors, stunt growth and kill jobs. Few investors will want to put their money into an economy, or create new jobs, when a politician gets to decide what the labour force looks like or how the labour market operates.

The ANC rammed the Employment Equity Amendment Bill onto the order paper before parliament went into recess for the local government election campaign, so that it could lay claim to a conveniently timed victory for “our people”. Embarrassingly, it failed to secure a quorum to pass the bill. Yet it would have been a sham achievement anyway, for the bill will not do anything for the poor, the marginalised, or the rural masses on whose behalf the ANC professes to speak.

Its remedial measures, such as they are, do not target the disadvantaged. They do not advance the disadvantaged, and they do not promote the achievement of equality. A failure to meet those three tests — as laid down by the Constitutional Court in the Van Heerden case in 2004 — means the bill is constitutionally dubious.

It is likely to help only a small, skilled and politically connected elite. It will widen the inequality gap between the small black elite that benefits from racial preferencing laws on the one hand, and the 10-million black South Africans on the other, who are unemployed and unlikely to find jobs because of the very same laws that disincentivise job creation.

SA’s delicate social fabric is frayed. Our economy, if not yet quite in smithereens, lies broken. Instead of repairing and rebuilding it the ANC prefers to give the employment and labour minister a job-destroying jackhammer.

• Cardo is DA shadow employment and labour minister.