Minister of Employment and Labour, Thulas Nxesi, says that South Africa has a ‘deep hole’ syndrome in its workforce that has been left unaddressed for the last 24 years – and that’s why the government has been forced to take action.

In a column penned this week, Nxesi said that ‘deep hole’ means “things get darker as you go deeper”, referring to the fact that the lower down you go in workplace hierarchies, the more black South Africans are represented in the workforce.

The upper levels, meanwhile, remain “light”, with an overrepresentation of white South Africans in top and senior management.

Citing the Commission for Employment Equity’s latest Annual Report for 2022, the minister flagged the over-representation of the white population group in key economic sectors at top and senior management level – from 55.6% in mining to 83.1% in agriculture.

“As one goes to lower occupational levels, the percentages are reversed, and one sees higher percentages of the representation of black people, in particular Africans and coloured,” Nxesi said.

This pattern has persisted for the last 24 years of employment equity laws being in effect, pointing to painfully slow progress in transformation in the economy. It is this that led the government to take further action to speed up the process through the new Employment Equity Amendment (EEA) Act.

The EEA Act was signed into law by president Cyril Ramaphosa in April. While not yet in effect – they are expected to be promulgated in September – the laws empower the employment minister to set specific racial targets for businesses in South Africa to hit over five years.

These targets were published in May 2023 and immediately drew fire from businesses, legal experts and industry bodies.

For its part, the Department of Labour and Nxesi have tried to quell the backlash through roadshows and campaigns explaining how the new laws will benefit workers and the government’s transformation agenda.

However, political parties have characterised the laws as backwards – hailing back to apartheid-era racial divisions – while businesses remain unconvinced that the laws will even work, given the reality of South Africa’s workforce and skill levels.

No easy answer

According to the latest Sanlam Transformation Gauge, sector feedback on the new laws has been mixed. While businesses at large acknowledge the importance of transformation and work towards it in the country, skills remain a critical impediment.

This is particularly evident in highly skilled fields like Information Technology (IT), which remains one of the key industries in South Africa where transformation targets and BEE scores are the most difficult to attain, and the available skills are the hardest to come by.

According to transformation experts and BEE consultancies quoted in the Sanlam report, companies in South Africa are already competing for talent and critical skills – not just locally, but internationally as well. Thus it is already challenging to retain talent and appoint staff with the required skills.

The sectoral targets being imposed by Nxesi and department limit and reduce that pool even further, they said.

The key factor in determining whether the targets are even achievable – even in five years – is the availability of the skills in each demographic and occupational level.

“Given the current state…it is highly unlikely that these targets can be achieved,” the experts said.

Using the IT sector as an example, the 2022 workforce in the professionally qualified category is only 28.2% African. This is required to increase to 60.9% in just five years – more than double the current representation in a sector where skills cannot be developed at the speed the country changes.

Another issue flagged by businesses is that, while quality black talent is available in the market, there is fierce competition for this talent, resulting in a “very mobile” demographic that is typically paid more than their white equivalents. This results in smaller businesses being unable to compete with larger companies that can afford the salaries.

This problem only escalates the higher up you look into the hole, with companies struggling to find “affordably priced leadership talent” – the sector Nxesi specifically wants to transform.

Making matters worse, failure to meet these targets will result in companies being penalised – whether through actual fines or the loss of business.

Businesses lose out

The new BEE laws introduce Employer Equity Certificates of Compliance. Without the certificate, businesses will lose points on their BEE scorecards. Not only will they not be able to do business with the government, they also lose out in competition with other firms.

According to the labour department, the issues raised by the business sector haven’t gone unnoticed. The department has hit back at the talk of racial quotas and crippling businesses by explaining that the targets are not rigid quotas that have to be hit.

The five-year target offers flexibility, it said, while businesses who fail to comply – for a host of reasons, including a lack of available talent – can also apply to be exempt.

However, even in these cases, the onus falls on businesses tvo state and prove their case.

Meanwhile, the new laws continue to come under scrutiny and will likely face many more legal challenges on the path ahead.