Issued by Ismail Joosub on behalf of the FW de Klerk Foundation on 22/04/2025

South Africa’s employment equity regime has undergone its most sweeping transformation in decades. The Employment Equity Amendment Act of 2022, signed into law in April 2023 and in force since 1 January 2025, empowers the Minister of Employment and Labour to set binding, sector-specific demographic targets across 18 sectors of the economy, with designated employers required to submit aligned Employment Equity Plans from 1 September 2025. Companies with 50 or more employees (classified as “designated employers”) will be required to align their five-year Employment Equity Plans with state-determined quotas, ranging from 86% to 96% representation of designated groups in the skilled and professional brackets. Failure to comply, or to provide acceptable justification, will incur steep penalties of up to R2,7 million or 10% of annual turnover (for repeat offenders and R1,5 million or 2% annual turnover for first time offenders) and could render companies ineligible for public contracts through the withdrawal of compliance certificates. While exempting smaller businesses, the legislation effectively makes demographic compliance the gateway to state procurement.

The rationale behind this shift is clear. In 2022, 65,9% of top private-sector management roles were held by white South Africans (who constitute just 8% of the population) while Black Africans, comprising nearly 80%, held only 13,8%. The Black African unemployment rate hovers around 37%, compared to 8% for white South Africans. These disparities are deeply entrenched and morally indefensible. The Constitution permits “legislative and other measures” under section 9(2) to advance those disadvantaged by unfair discrimination. Yet such measures are not a blank cheque. Section 9(3) prohibits unfair discrimination, even under the guise of redress. In Minister of Finance v Van Heerden, the Constitutional Court outlined a three-part test: The measure must target disadvantaged groups, be designed to advance them and promote the achievement of equality. Later cases, such as SAPS v Solidarity (Barnard), confirmed that even where these criteria are met, a measure may still be unconstitutional if it imposes unfair harm or functions as an absolute barrier. That distinction matters.

However, good intentions do not immunise a policy from constitutional scrutiny. The Employment Equity Act of 1998 itself, in section 15(3), forbids rigid quotas. The newly gazetted targets, particularly in sectors where 95% demographic representation is expected within five years, risk crossing that constitutional line. The Constitutional Court’s decision in Barnard upheld the concept of employment equity, but warned against the use of absolute numerical formulas that leave no room for individual merit or contextual nuance. Likewise, the Supreme Court of Appeal in 2017 (in Minister of Justice and Constitutional Development v South African Restructuring and Insolvency Practitioners Association) struck down a government policy that allocated fixed race percentages for insolvency appointments, ruling it violated the rights to equality and dignity.

The risk here is that the sectoral targets function not as flexible guidelines, but as hard quotas. Companies that miss them, even for reasons like skills shortages, economic downturns or mergers, must prove their innocence to avoid sanction. Although exemptions exist, they are narrow and bureaucratically onerous. The result is a regime where compliance becomes a tick-box exercise and employers are incentivised to prioritise race and gender statistics over actual transformation. Policy becomes arithmetic.

This legal concern is mirrored by significant economic and practical risks. The economy is under strain. Growth is slow, investment is fragile and job creation is stagnant. Forcing businesses to meet strict demographic profiles could deter hiring, trigger automation, or discourage firms from expanding beyond 49 employees. The unintended effect may be that compliance with racial formulas stifles the very economic growth necessary to support transformation. In this climate, it is no surprise that some business leaders see the policy not as a path to inclusion, but as a “job killer”.

Moreover, the consequences extend beyond balance sheets. Professionals who perceive their career advancement to be capped by immutable demographic targets, whether Black, white or coloured, may disengage, emigrate, or opt out. Even among intended beneficiaries, forced representation without support risks fostering tokenism rather than empowerment. A demographic box ticked does not guarantee that the person promoted is equipped, supported or respected. True transformation requires investment in people, not just statistics.

Crucially, there are better alternatives. Race may correlate with disadvantage, but it is not a perfect proxy for it. A shift toward class-based redress (focusing on socioeconomic hardship rather than racial identity) would still primarily benefit historically disadvantaged Black South Africans, but would do so on principles of fairness and need. This model avoids the constitutional fragility of race-based categorisation and promotes inclusion without exclusion. Candidates from poor schools, rural areas, low-income households, or first-generation university backgrounds could be given preference in recruitment and promotion. This would be legally stronger, socially more unifying and economically smarter.

International experience supports this. Canada’s Employment Equity Act, while robust, does not impose quotas. Instead, it encourages employers to identify barriers, set goals and report on progress. Singapore has used massive investment in universal public education and housing to close racial gaps—without engineering workforce composition. Germany’s focus on vocational education and apprenticeships has created inclusive labour markets by growing the pool of skilled workers. These countries have found ways to uplift disadvantaged communities without hard coding race into employment formulas.

South Africa could follow a similar route. Rather than punishing firms for missing quotas, incentivise those who do the hard work of transformation. Companies that invest in Black employee training, mentor women into management, or grow township supplier networks should be rewarded with tax credits, bonus procurement points, or national recognition. Carrots often succeed where sticks fail. Progress must be made measurable, but not mechanical.

Another critical reform would be to introduce sunset clauses and independent reviews. Redress should never become a permanent policy. Measures designed to correct past discrimination must themselves be assessed for fairness, proportionality and continued necessity. The government’s own 2023 settlement with Solidarity conceded that affirmative action must be temporary. Yet the current legislation includes no review mechanism and hands enduring power to the Minister to set sectoral targets indefinitely. A system with no exit strategy risks perpetuating what it sought to eliminate. And that is, exclusion justified by classification.

Finally, we must invest in the pipeline. Real transformation happens when the pool of skilled, empowered South Africans grows. That means improving the quality of public education, expanding access to tertiary institutions, building vocational training centres and funding mentorship and internship programmes. Diversity must be a product of opportunity, not of pressure. With a stronger foundation, representation will follow.

South Africa now faces a defining choice. We can continue down the path of numerical compliance, with all its constitutional and economic costs. Or we can choose a more principled and pragmatic road. A road that pursues fairness without division, empowerment without coercion and redress without regression. The Constitution does not ask us to count heads. It asks us to restore dignity. And that is a far more difficult, but ultimately a more sustainable task.