Frik Boonzaaier | Senior Consultant | Human Capital Transformation | The BEE Chamber | mail me |
Since President Ramaphosa signed the Employment Equity Amendment Bill into law on 12 April 2023, there has been significant commentary – from positive to strongly negative – of the impact the amendments may have. Much of it has referred to Broad-Based Black Economic Empowerment (B-BBEE) changes when there have in fact not been any amendments in terms of B-BBEE.
Treating Employment Equity and B-BBEE as one and the same thing, has caused significant confusion in the market.
Likewise, with the Gazetting of the Draft Sectors and Draft Sectoral Targets by the Minister of Labour on 12 May 2023 to set some of the new provisions in motion, there has been strong reaction from different corners of the market with a variety of interpretations of how the Draft Sectoral Targets should be interpreted.
Dispelling the myths in sectoral targets
Kicking off with the burning platform of sectoral targets, it’s time to dispel the myths in terms of how these targets should be treated.
One of the first questions which arose very shortly after gazetting, is that the sector target percentages do not add to 100%. As an example, the Draft National Senior Management Targets for the ‘Human Health and Social Work Activities’ Sector add to 68% between Africans, Coloureds, Indians and Whites.
The question is then what we should do with the residual 32%? One of the interpretations is that the sectoral targets should be viewed as the maximum allowable representation of particular groups. In this scenario, in certain provinces at certain levels, the targets seem to indicate that there should be no representation of Coloureds and Indians. This is incorrect.
In a media statement on 16 May 2023, the Department of Employment and Labour indicated the following to correct the misconception: “…those employers that have surpassed the regulated minimum targets proposed per sector, are encouraged to still be proactive in setting EE targets towards achieving the demographics of the EAP”. This is in line with the fact that the Amendments have simply added Sectoral Targets as objectives towards which companies need to work, but that the EAP Objectives remain intact as the ultimate benchmark.
Section 42(1)(a) still reads (as it has since the Act’s inception in 1998):
“In determining whether a designated employer is implementing employment equity in compliance with this Act, the Director-General or any person or body applying this Act may … take the following into account: The extent to which suitably qualified people from and amongst the different designated groups are equitably represented within each occupational level in that employer’s workforce in relation to the demographic profile of the National and Regional Economically Active Population…”
Therefore, once the Final Sectoral Targets have been gazetted, employers will need to develop Employment Equity Plans with targets which will meet those targets over a 5-year period.
The sectoral targets should be treated as the minimum interim objectives on the road to ultimately meeting the EAP Targets – the EE Plan Targets should aim for somewhere between the sectoral targets and the EAP Targets. Continue to aim for the EAP demographics and you will meet the sectoral targets.
Where does that leave us regarding the B-BBEE management control targets?
These remain intact. So for example, based on the latest EAP Targets (from the 22nd Commission for Employment Equity Report), in order to score full points for senior management, a measured entity needs to have a 60% alignment with EAP.
The final result, after having calculated the Adjusted National EAP (which excludes the White portion of EAP) would be a B-BBEE target of 28,68% to score full points on the senior management line item. This methodology has been in place since the amendment of the BEE Codes in 2013. The gazetting of the Employment Equity Sectoral Targets has no bearing on this, considering that the 60% alignment target is still based on the full EAP targets, and not on any sectoral target.
It is important to understand a particular distinction between Employment Equity and B-BBEE legislation.
In conclusion
The Employment Equity Act has had, and will continue to have, a punitive measure in the form of fines should a company fail to comply, including complying with the sectoral targets. B-BBEE, on the other hand, is not a compliance issue.
Points are awarded for meeting certain targets and the overall B-BBEE level attained for ownership, management control, skills development, enterprise and supplier development and socio-economic development has an impact on a company’s ability to attract and retain clients. This pressure comes from clients, not from government.
Once we have Final Sectoral Targets, these will be interim targets to move companies closer to EAP alignment, which is the ultimate benchmark. Therefore, should a company aim for alignment with EAP, they will also meet the lower sectoral and B-BBEE management control targets. EAP is still, and will continue to be, victorious.
