KWANELE NGOGELA AND AYABULELA QUZU: Why sectoral equity targets are needed to transform labour market

It is no secret that SA’s glaring inequalities persist three decades into the country’s democratic dispensation. This is particularly manifest in the labour market, which continues to be a battleground of race and gender-based contestation.

As Stats SA puts it, “the labour market remains one of the key institutions through which exceptionally high levels of both vertical and horizontal inequality are transmitted”. In other words, inequality is not only a result of unemployment but also of skewed income distribution and unequal access to opportunities in the workplace.

SA’s legacy of systemic discrimination, particularly in limiting economic opportunities for designated groups such as black people (Africans, coloureds and Indians), women and people with disabilities, is well documented. Legislative efforts have been made to address this, such as the Employment Equity Act, which aims to promote the constitutional right to equality, eliminate unfair discrimination and achieve employment equity and a workforce representative of our demographics. Yet women and black individuals are still underrepresented in leadership roles in the private sector, especially at senior and top management levels.

In 2023 in its 23rd annual report, the Commission for Employment Equity highlighted that though black people make up 92% of the national economically active population, they occupy only 32.2% of top management positions. Women occupy 26.5% of these, despite constituting 45% of the economically active population.

Research by Just Share in 2023 revealed stark gender disparities in the JSE top 40 companies, with only 35% of these companies’ boards chaired by women and only 25% of executive management positions held by women. More comprehensive measures are needed to transform SA’s corporate landscape.

To address the slow progress in race and gender equity in the labour market, on February 1 former employment & labour minister Thulas Nxesi published new draft regulations for comment, in anticipation of the commencement of a new section inserted into the Employment Equity Act last year. Once in force, section 15A will empower the minister to set sectoral numerical targets “for the purpose of ensuring the equitable representation of suitably qualified people from designated groups at all occupational levels in the workforce”. The draft regulations indicate that the minister has, after consultation, proposed numerical diversity targets for identified sectors.

For instance, within five years employees from “designated groups” should make up at least 40% of “top management” in the manufacturing sector, with women constituting a minimum 15%. For “senior management” in the same sector, women should represent at least 17% of the minimum 50% target.

The Employment Equity Act as now in force does not impose transformation targets, instead relying on companies to develop employment equity plans and set diversity targets and timelines to achieve “reasonable progress”. However, relying on corporates to voluntarily adopt and achieve employment equity has failed to translate into meaningful change, especially in key decision-making structures.

It is no surprise that the recent amendments to the act and proposed targets have given rise to concern in the corporate sector. Solidarity, a trade union, filed an application in the labour court arguing that numerical targets are not only unconstitutional but contravene international labour conventions by imposing racial categorisation and quotas, which create absolute barriers based on race.

In fact, section 15(4) of the act makes clear that designated employers are not mandated to make decisions regarding employment policies or practices that would create an absolute barrier to the prospective or ongoing employment or advancement of individuals who are not from designated groups.

Ultimately, Solidarity and the government concluded a settlement agreement, the terms of which are now incorporated into the draft regulations. These confirm, as per section 15(4) of the act, that absolute barriers are prohibited. In addition, the draft regulations make clear that “no employment termination of any kind may be effected as a consequence of affirmative action”. In any event, the draft regulations also state that an employer will not incur any “penalties or any form of disadvantage” if there are “justifiable/reasonable grounds for not complying with the targets”.

Despite challenges and objections to these provisions, the introduction of numerical targets is a positive step. Employment equity legislation has not been particularly effective in ameliorating gender and racial inequities in the labour market. These sectoral targets aim to promote a diverse workforce by ensuring fair representation of historically disadvantaged groups without discriminating against others.

This approach aligns with the Employment Equity Act’s goal of achieving equity in the workplace. Moreover, the constitution allows for affirmative action to promote equality — an ideal that resonates with bridging the historical divide of repressive labour institutions and their lingering legacies and upholding the dignity of all workers.

This is particularly important given the Commission for Employment Equity’s findings of continued racial and gender disparities in the labour market. The report also underscores the slow progress in implementing affirmative action to achieve equitable representation of economically disadvantaged groups in workplaces.

The benefits of transformation in the labour market extend far beyond moral imperatives — they are essential for a company’s success. A 2023 study conducted by McKinsey & Co showed that companies with more diverse workforces outperformed their counterparts. The study also found that a company with a diverse workforce tends to benefit from views and perspectives from different backgrounds, which assists the company in adapting effectively to market-related challenges and capitalising on emerging opportunities.

In its 2022 Sustainability Disclosure Guidance, the JSE recognised that “organisations with higher levels of diversity, particularly within executive teams, are generally better able to innovate, attract top talent, improve their customer orientation, enhance employee satisfaction and secure their licence to operate”.

The introduction of these targets should not be misconstrued as “reverse” discrimination. Instead, they represent an effort to level the playing field in the labour market, in circumstances where the provisions of the Employment Equity Act have failed to achieve this despite being in force for more than two decades. They offer SA companies an opportunity to embrace the advantages of a diverse workforce, which are crucial for success and innovation.

In a country where almost everything turns into contestation, the sectoral diversity targets should be seen as a long overdue opportunity to demonstrate that, given a fair chance, everyone who is suitably qualified, regardless of their background, race, gender or other traits, has an equal opportunity to succeed across all occupational levels within our labour market.

• Ngogela is a senior inequality analyst, and Quzu an analyst, at Just Share.