EEB which fines companies millions for employing more whites or foreigners: Ramaphosa warned

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Over 20 000 South Africans have signed the petition calling on President Cyril Ramaphosa to veto the Employment Equity Amendment Bill (EEB), which IRR analysts warn will risk pushing unemployment above 50% on the expanded definition.

The EEB is the primary example of “more aggressive” BEE identified by Employment and Labour Minister Thulas Nxesi, nominally “to expedite transformation in the workplace”. However good the intention behind this policy might be, it will have the opposite effect of helping everyone looking for employment in South Africa to find a chance to add value.

If adopted, the EEB would allow Minister Nxesi to impose public sector race quotas – which have sometimes implied that it is better to leave a job vacant for years than to hire a white person – on the private sector. This would be enforceable by multimillion rand fines.

The EEB would also force employers to “pencil test” their own staff while reinstating racial pre-qualification criteria for tenders, meaning businesses are not allowed to name their price in a bid to government based on race. Racial pre-qualification criteria were recently invalidated in court.

Even without this draconian law South Africa is in deep trouble. Over 400 people have died amid KZN’s collapsing infrastructure during the recent floods, and the country’s major harbour is clogged to the point of being disfunctional.

The most common everyday problem, however, is that according to Stats SA more than 50% of black adults are unemployed, a world record. IRR polling has consistently identified unemployment as the number one problem in South Africa.

Said Gabriel Crouse: “On the label it says more aggressive BEE will cure unemployment, but in reality BEE has already contributed to mass unemployment. Making BEE ‘more aggressive’ will only harm the prospects of those poor people desperately rubbing their hands in the unemployment line. With BEE what it says on the label is the opposite of the effect it has on the ground.”

The IRR’s petition calling on the President to veto the EEB identifies a strong appetite for adding skilled young black people to a workforce that is frustrated by government failures in the public education system, red tape in the labour market, and especially by the narrowing economy. BEE has observably contributed to the narrowing of the economy.

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The State Capture Report identifies the mechanism by which BEE harms poor people, observing that racial preferentialism starts by turning away from a “value-for-money” system and then entrenches “intractable problems” by incentivizing rent-seeking and corruption.

According to former Treasury Chief Procurement Officer Willie Mathebula, “the government’s procurement system is deliberately not followed in at least 50% of all tenders” which is easier to do because race preferentialism makes the system confusing and obscures transparency.

Rent-seeking and corruption directly hamper service delivery while alienating value-add investors. As a result, the economy does not grow, but narrows as a greater share of income goes to a multiracial network concentrated around power, which means there is less for everyone else.

According to a 2020 poll commissioned by the IRR, 80% of respondents, including 80% of black respondents, preferred job appointments to be based on merit rather than the type of quota system that will be imposed under EEB.

Concluded Crouse: “It is no surprise that thousands upon thousands of South Africans of all races have signed up to stop EEB. The question is, will President Ramaphosa heed their call?”

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