The rights and wrongs of Dis-Chem’s racial transformation policy

25 Oct 2022

Amendments to the Employment Equity Act effectively turn what was a monitored, agreed programme into a legislative battering ram.

How do we discuss rationally and sensibly South Africa’s lack of racial transformation in the corporate sector? There is almost no topic nationally — apart from, perhaps, the land issue — which is more fraught, more complicated and more potentially toxic. I write this in the knowledge that idealogues on both sides will castigate me and anyone else who enters this dangerous war zone. But how can we just ignore it?

So, a quick recap. The furore began last month when Dis-Chem’s founder and CEO, Ivan Saltzman, issued a memo to staff saying he was calling a halt to the promotion and hiring of white South Africans. The company was falling behind on its racial transformation targets at certain levels, and from henceforth any hiring of white South Africans would require his explicit permission.

Saltzman might seem as though he is acting out of concern for the racial balance within the organisation, but the memo makes it clear that his eye is at least partly on the recently passed parliamentary amendments to the Employment Equity Act. The amendments give the labour minister a new stick of dynamite with which to blast corporate SA, something SA’s politicians love to do.

The amendments effectively turn what was a monitored, agreed programme into a legislative battering ram. The statute allows the minister to fine companies 10% of their turnover if they don’t comply with government-designated targets. To say that this is a disaster waiting to happen is an understatement. That fine would amount to around R3-billion if imposed on Dis-Chem, wiping out three years of profits. And if that happens, jobs go.

Of course, pundits on all sides have made valuable comments on the issue. Lawyer Marthinus van Staden says he doesn’t sympathise with Saltzman, who has had decades to improve the racial mix, but clearly hasn’t done so.

Nevertheless, the Constitutional Court has wrestled with this issue several times and it’s likely that Saltzman has now acted illegally by imposing an absolute ban. The law allows discrimination to right past wrongs, but frowns on quotas since they are tantamount to injunctions, which is reverse discrimination and offends the Constitution’s very emphatic equity provisions.

Saltzman a ‘hero’

In Business Day, former Sowetan editor and CEO of the Small Business Institute, John Dludlu, argues that far from criticising Saltzman, we should treat him as a hero.

“The argument by the right-wing advocacy bodies is flawed. First, the country is where it is because of colonialism and apartheid. Second, there would be no need for employment equity if there had been no brutal apartheid/colonialism. Third, AfriForum and the DA are the beneficiaries of white affirmative action. Fourth, the case for white fragility is mischievous,” he writes.

The great irony is that actually, taken as a whole, the racial mix in Dis-Chem as an organisation is very aligned with the population. 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. The board is a 50/50 mix of previously disadvantaged individuals and whites, a group which includes Saltzman himself and his son.

But this is not the problem. Although the company won’t quantify the precise proportions at various levels in the organisation, the problem is obviously at senior management level. We know this because recently the Commission for Employment Equity published its 2020/21 report and, as usual, it found senior management in SA heavily dominated by white men. From a very broad tally of SA’s business, the report determined that 63% of senior managers were white, as opposed to the roughly 9% there should be if you go by employed people in SA as a whole. As you go down the employment ladder, the white overrepresentation does even out, eventually.

Looking at these findings is depressing. If you had told me that 30 years into democracy, 63% of managers would still be white, I would not have believed you. So, why has this happened?

Political ideologues have a simple explanation: racism. I’m sure there is some of that, and some old boys’ clubism too, but actually, this is not my experience of the private sector. Most responsible SA employers, black and white, are acutely aware of the lack of senior black managers in their organisations and fall over backwards to try to secure them, as evidenced by Saltzman himself.

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It’s worth comparing the outcome in the private sector with the public sector. The public sector has been much more aggressive about righting the balance over the past three decades and the Commission for Employment Equity’s figures suggest the public sector is generally in the ballpark from a racial point of view, although women are underrepresented.

We all know this has come at a huge cost. Jettisoning the entire senior staff of huge government departments has left many organisations floundering, hospitals appallingly managed, SOEs burdened by enormous debt and all the other problems we can list. Was this because of employment equity, or some other reason? Of course, we don’t know how much we can lay at employment equity’s doorstep, but it’s surely been a factor.

To take one very ironic example: the Commission for Employment Equity’s 2021/22 report. It’s a legal requirement for government departments to submit reports to the commission, but it received reports from only 55 government departments, representing around 350,000 employees, and 126 provincial government bodies representing another 620,000. That means departments representing about 30% of government employees just couldn’t be bothered to report.

In addition, only 132 of the more than 700 state-owned enterprises bothered to report. If they can’t bother to comply with this legal requirement, what else are they not doing? By comparison, there were more than 25,000 reports from private sector organisations.

Okay, time for me to put my cards on the table. I’m pro-equity in the workplace but against draconian employment equity. Why? Because aggressive employment equity schemes hurt employment equity. It’s that simple. Massive studies have been done on this, most recently at US universities, which have had schemes to boost the numbers of black students for decades, and the situation is getting worse.

A decade ago, no less a publication than The Atlantic, hardly a right-wing rag, explained why.

As the article says, university administrators “have become prisoners of a system that many privately deplore for its often-perverse unintended effects but feel they cannot escape”. Doesn’t that sound familiar? The law in many states is now the precise opposite: universities are not allowed to discriminate.

Experience and expertise

The big difference is that the government doesn’t face a set of consumers who make competitive choices on a daily basis. The price of getting things wrong can be colossal for the entire organisation, so the incentive in the private sector is to gravitate heavily towards experience and expertise. Obvious beneficiaries of affirmative action have less authority in the organisation and are consequently, in effect, set up to fail. Sometimes it works; often it doesn’t.

After being essentially excluded from working in the government, many white South Africans have become innovators in the private sector. If they succeed, the result skews the balance in their favour. Think for example of SA’s biggest bank by customers, Capitec, and a host of other innovative companies.

Another counterweight for SA businesses is international in character: the ability of the middle class to reproduce itself, with its concomitant “privileges”, is a global phenomenon. And then there is emigration, now at unacknowledged crisis levels, which, weirdly, tends to exacerbate the problem because it reduces the number of whites in the employment system overall, thereby lowering the divisor and increasing the level of disproportion.

There is one other thing to consider: we are more than a generation out of apartheid. Every time someone is given an undue advantage, someone else is, by definition, discriminated against. How do you justify discriminating against young white South Africans who had no personal responsibility for apartheid? It just seems awful to me.

Dludlu says we are here because of apartheid and colonialism. That’s true, of course, but we are also here because of maladministration and corruption, part of which is precisely the result of faux BEE schemes.

I hope this gets better; I’m sure it will over time. It is improving, but at a snail’s pace, yet I have no doubt that the scales will eventually balance. However, to my mind, one thing is absolutely clear: the aggressive implementation of employment equity with the spectre of massive fines will reduce the international and local competitiveness of industry, reduce employment and hurt all South Africans, black and white. DM/BM

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Saltzman a ‘hero’

Experience and expertise