More SA companies may be forced to pause hiring and promoting white people

Source: Commission for Employment Equity annual report 2021–2022.

By Ray Mahlaka

22 Oct 2022

In the same month that South Africa marked 24 years of the Employment Equity Act being enacted, pharmaceutical retailer Dis-Chem found itself in a furore over its workplace transformation plan, which involves no longer employing white people. Amendments to an equity law might see many more companies forced to follow suit

It has been 24 years since South Africa’s government introduced a breakthrough law to eliminate discrimination and promote diversity in the workplace to level the playing field after 46 harmful years of apartheid.

On 12 October 1998, then president Nelson Mandela signed into law the Employment Equity Act, an instrument through which affirmative action and organisational diversity would be promoted to increase the economic participation of the black majority, women, people with disabilities and other designated groups.

The Employment Equity Act sparked fierce and polarising responses. In one corner, some companies embraced the new law because it was the only step towards redressing South Africa’s terrible past of racial injustice. Faces in corporate corridors slowly changed to mirror South Africa’s diverse, multicultural and multiracial society.

In the other corner, the act created tension among employers, who worried that too much affirmative action would leave few employment opportunities for white people. This cohort, it was feared, would see no future for themselves in corporate South Africa and end up leaving the country — contributing to the brain drain. This pushback against affirmative action and race-based policies persists today.

In the same month (October) that South Africa marked 24 years of the Employment Equity Act being in place, pharmaceutical retailer Dis-Chem found itself caught in a furore over its workplace transformation and diversity plan.

Ivan Saltzman, CEO of Dis-Chem Pharmacies, at the annual results presentation at the Waterfall Distribution Campus in Midrand in 2019. (Photo: Freddy Mavunda / Business Day)

Dis-Chem regressing on transformation

It all started on 19 September 2022 when Dis-Chem founder and CEO Ivan Saltzman issued a memo to staff, telling them that the retailer is performing badly and falling behind on its racial transformation targets at certain levels.

To address this worrying situation, Saltzman told Dis-Chem staff that the retailer would be pausing the recruitment of white people unless a special case was made to him and the head of human resources.

“We are growing at a fast rate and a few appointments other than white don’t cut it. It’s the ratio between white and black that counts. So, when no suitable black [person] is found, and a white [person] is appointed, we need several blacks just to maintain the status quo,” he wrote in the memo.

By mid-October, Saltzman’s memo had been leaked and distributed widely on social media.

The memo was polarising (much like when Mandela’s administration introduced the Employment Equity Act) — some celebrated that Dis-Chem’s transformation policies were in line with those of the country; others argued that it amounted to reverse racism and vowed to boycott stores.

Saltzman has since apologised for the memo, but only to the extent that it was “poorly worded”. Dis-Chem told Daily Maverick that it is standing by its decision to not prioritise white people for appointments.

“All appointments at junior, middle and senior management levels will require CEO approval, and appointments will be made based on merit and the necessity of giving employment preference to previously disadvantaged individuals.”

On the surface, Dis-Chem looks like a transformed company that reflects the demographics of the country. Dis-Chem has more than 20,000 employees, of whom 84% are classified as previously/historically disadvantaged (black, Indian and coloured) and 63% are female (see below).

dis-chem transformation graph Source: Dis-Chem’s 2022 annual report.

But Dis-Chem doesn’t offer a breakdown or specific figures about its transformation profile for junior and middle management levels, where important decisions are made.

At a senior management level (board and executive level), Dis-Chem is arguably regressing on being racially inclusive. The 10-member board has three women and four black people.

White males dominate at executive-level positions at Dis-Chem. This is the same pattern in the retail industry at companies including Mr Price, Truworths International, Pepkor (owner of Pep, Ackermans and others), Steinhoff, Cashbuild and Lewis.

So, Saltzman has a valid reason to be concerned about Dis-Chem’s employment equity profile — concerns that are compounded by labour law changes that are on the horizon. The changes will impact Dis-Chem and thousands of other companies.

Employment and Labour Minister Thulas Nxesi has pushed for the Employment Equity Act to be amended as he believes companies are not taking transformation and affirmative action objectives seriously. He says there isn’t a spirited commitment by companies to embrace the act, and those complying with it view it as an “annoyance and a box-ticking exercise”.

Nxesi’s views are supported by reports of the Commission for Employment Equity, which tracks compliance with the act by companies every year.

Companies are required to submit reports to the commission that detail, among other things, how many people they employ and segment them according to race, sex, skill levels, disability and other measures. And year after year, the commission’s report paints a dire picture of black people not being appointed to senior ranks at private and public sector entities.

On average, the commission receives 27,000 reports every year from companies that collectively employ 7 million people. An analysis by the commission shows that from 2019 to 2021, white people remain overrepresented in senior leadership positions (see below).

dis-chem report Source: Commission for Employment Equity annual report 2021–2022.

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Law changes

More regulation is on the horizon as Parliament recently passed amendments to the Employment Equity Act, which are yet to be signed into law by President Cyril Ramaphosa.

The amendments, which are expected to come into force in September 2023, will bring about an important change. Nxesi will now have the power to regulate the compliance by companies with the act, and he can set employment equity/affirmative action targets for different industries.

The targets are yet to be determined by Nxesi in consultation with the Commission for Employment Equity, and various industries will be given at least 30 days to comment on the targets. Once the targets are determined, companies (except small ones that employ fewer than 50 people) will be required to regularly report on their compliance.

Gillian Lumb and Nadeem Mahomed from Cliffe Dekker Hofmeyr, which specialises in labour law, said amendments to the act are aimed at strengthening requirements for equitable representation of people from designated groups (historically disadvantaged groups of people based on race, gender and disability) at all occupational levels in the workforce.

Nxesi also wants companies that are not serious about transformation to be punished. He said errant companies won’t be able to do business with the state or receive contracts. Companies might also risk being slapped with fines equivalent to 10% of their annual turnover or sales.

These fines also apply to companies that fail to meet broad-based black economic empowerment objectives — another law related to affirmative action. In Dis-Chem’s case, its non-compliance might translate to a fine of more than R3-billion based on its most recent annual turnover of R30.4-billion.

Dis-Chem’s Saltzman has described the potential sanction as “a real threat”.

A Johannesburg-based labour analyst and policymaker argued that a punishment mechanism won’t work because institutions that are meant to track non-compliance — such as the Commission for Employment Equity and the Black Economic Empowerment Commission — remain underfunded by the government, lack compliance-related skills and have been weakened over time.

“Without strong institutions of accountability, we will have another 24 years of no-to-slow transformation. The painful legacy of apartheid will keep thriving,” said the analyst. DM168

This story first appeared in our weekly Daily Maverick 168 newspaper, which is available countrywide for R25.

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Dis-Chem regressing on transformation

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