PIET LE ROUX AND GERHARD PAPENFUS: New race quotas — a full-scale attack on business freedom

Last week the SA government published its new racial hiring quotas, which instruct businesses to reduce white males to as little as 4% of its workforce. 

The regulations herald perhaps the most sweeping racialisation of the SA labour market, seeking to impose racial hiring quotas on local and international companies alike and threatening to destroy hundreds of billions of rand in economic value if diligently enforced. 

According to the Employment Equity Act, the purpose is to “ensure equitable representation” of “designated groups” in employment across the country. But what this really means — according to the likes of the Employment Equity Commission, President Cyril Ramaphosa and the ANC — is the forced change of the workforce of every company of consequence to one that mirrors the racial composition of the country. 

Such totalitarian intervention in company hiring decisions would be an absolute disaster for job numbers and employment by itself. But failing to comply with the mostly impossible regulations is similarly ruinous. 

Missing the “numerical targets” comes with a debilitating 10% of turnover fine, among other penalties. There is the theoretical possibility that the department of labour may issue sanctioned companies a temporary pardon, on a case-by-case basis, but this only underscores the capricious nature of the regulations, making business and investment planning a nightmare. 

The act craftily avoids calling these “racial quotas”, preferring the more euphemistic, and seemingly more flexible, “numerical targets”. The distinction between quotas and targets is only semantic. The fact is, missing them carries punitive sanction.   

The labour department wants compliance to commence in September this year. As much as five years may be allowed for complete implementation, provided the regulator is satisfied with your “progress”. 

The quotas currently apply to companies with 50 or more employees, but that threshold can be lowered at a legislative whim. The government’s track record of shifting the goalposts in racial economic policy makes this more a matter of when, not if.  

The official regulations divvy the economy up into 18 ill-defined “sectors”, and then employment into four categories called “top management”, “senior management”, “professionally qualified and middle management” and “skilled technical”.

Each category is then assigned three percentages — one for “designated groups” males (that is, males as long as they are not white), one for “designated groups” females (including white females) and one for “disability only”.

Able-bodied white males do not appear in the regulations — they are the remainder after the designated groups are subtracted from 100. 

So we have 18 sectors, four employment categories, various racial group quotas, gender quotas and disability quotas for a matrix of at least 576 variables to be optimised by labour department central planners. 

In the case of “financial and insurance” businesses, “top management” is allowed to be 37% white males, which declines rapidly through other categories until it bottoms out in the “skilled technical” category allowing for white males to make up no more than 4%.

In healthcare companies, white males should max out at respectively 29% and 4%; in administrative and support services (such as security companies), 30% and 4%; mining companies, 29% and 4%; education institutions 26% and 4%, and so on. 

Agricultural operations get limited (for now) to between 66% and 6%, which is a not-very-subtle way of telling a white farmer that there’s no place for his sons on the team.

The sector that really reveals the goalpost-shifting endgame for all sectors though, is “public administration and defence”. Here, white males must be reduced to a maximum of 8% of top management employees, and 4% of the rest. 

Targeted domestic sanctions and expropriation 

In short, the new employment equity regulations aim to push white people in general, and white males in particular, out of jobs. In practice, this is a targeted economic sanction against a section of the domestic population. 

Moreover, in the language of another controversial statute in this country today, these forced hiring directives are a form of expropriation, in which the state attempts a race-based transfer of a company’s effective control without compensating the existing owners.

Such targeted domestic economic sanctions are unacceptable and harmful enough, but where strict enforcement compels companies to hire people without the requisite skills or suitability, less value will be produced at more cost.

Business efficiency will be greatly harmed. Declining productivity will ripple out with a colour-blind negative multiplier effect, affecting business viability, investment undertakings and hiring across the economy. 

International repercussions 

To the extent that international companies have participated in employment equity since the original act was passed in 1996, they may have developed some tolerance for the SA government’s unusual insistence on race. Many would have outsourced to human resources (HR) consultants the periodic “employment equity plans” they were required to submit, having been assured that the company may determine its own flexible targets and that missing the targets wasn’t a major problem. 

However, it will soon become clear to these companies that the amended act and regulations now prescribe specific and onerous race, sex and disability quotas — to be met under penalty of fine, and eventually personal prosecution and prohibition of trading.

Before long, the boards of international companies operating in SA will conclude that they are facing the most outrageous — and impossible — diversity, equity & inclusion programme in the world.  

Some will guts it out because returns are that good, trusting that impossible programmes like these always have loopholes and eventually fail. They will keep their expansion plans limited though. 

Others will leave, not having signed up for such absurd and fluid risk vectors, which also expose their owners and senior management to extensive ethical, moral and legal risk both inside and outside SA. 

Either way,  many international companies will be getting in touch with their embassies. Every one of those conversations will be fuel on the fire of international controversy in which SA finds itself around racialised economic policies. 

What happens next?  

The new employment equity regulations seek to impose completely unreasonable operational obligations on thousands of businesses. Minimum possible compliance and maximum appropriate noncompliance will be widespread as businesses prioritise the reality of looking after their customers, employees, and owners over practically impossible bureaucratic fantasies.  

Countless businesses and their employees oppose this harmful and destabilising hyper-racialisation of their workplaces in principle and in practice. Meanwhile, opposition from foreign companies and their representative embassies can be expected to escalate, with the possibility of diplomatic consequences. 

Moreover, groups like Sakeliga, the National Employers’ Association of SA (Neasa) and others are preparing comprehensive litigation strategies to oppose the employment equity regulations on constitutional and practical grounds. 

Together, this forms a wave of strong and principled opposition that should act as an encouragement to companies as they confront another irresponsible attempt by the state to exert total centralised control over economic activity in SA. 

• Le Roux is CEO of Sakeliga, and Papenfus CEO of Neasa.