Court Challenge Targets New Employment Race Initiatives

The National Employers Association of SA (Neasa) and the Afrikaans business organization Sakeliga have announced a partnership to challenge the new racial hiring policies under the Employment Equity Amendment Act (EEAA), deeming them unconstitutional, illegal, and damaging.

This legislation, which was enacted in January 2025, imposes hiring quotas across 18 economic sectors, including agriculture, mining, transport, and construction.

Listen/read: Listen: Employment equity targets gazetted: What it means for SA business

The objective is to enhance employment opportunities for “designated groups,” which include Black individuals, women, and people with disabilities.

Employers with 50 or more employees are required to align their employment equity plans with the new sector-specific targets. These plans must be developed and executed between 1 September 2025 and 31 August 2030.

“We believe that the demands of the EEAA and its regulations are unconstitutional, unfeasible, and detrimental,” stated Neasa and Sakeliga.

“The sectoral targets represent rigid hiring quotas based on race and demographic ratios that the state intends to enforce under the threat of a 10% penalty on turnover.”

The two organizations are set to initiate an immediate joint legal challenge, seeking an interdict against the implementation of the regulations and targets outlined in the act, as well as the act itself.

‘Totalitarian infringements’

“The state is acting unconstitutionally by imposing totalitarian restrictions on the rights of businesses, owners, and employees to associate and engage in commerce freely,” they assert.

“Under the pretense of ‘transformation,’ the EEAA promotes a stifling stagnation—mandating that all commercial activities, and by extension social interactions, conform strictly to predefined racial and demographic ratios.

“Moreover, the state is causing substantial harm as it undermines the economy’s productive capacity and pits various societal groups against one another while overstepping its legitimate bounds.”

Listen: 43% of board directors believe they are supporting effectively, while only 22% of CEOs concur.

Regulations published under the act on Friday allow for certain justifiable exceptions to the new quotas, such as lack of skilled individuals within designated groups or consequences arising from mergers or business transfers.

Employers with fewer than 50 employees are no longer required to establish employment equity targets.

The legislation has faced criticism from the Democratic Alliance (DA) and the trade union Solidarity, condemning it as unconstitutional and a revival of apartheid-era restrictions on job opportunities based on race. The DA estimates that this could lead to approximately 600,000 job losses.

“Employment equity costs South Africa billions of rand annually, on top of employers’ desperate measures to avoid creating more jobs,” stated DA employment and labor spokesperson Michael Bagraim in Business Day.

“It is a shame that as of 2025, we still have so many race-based laws on our books. While there is a consensus that we must address past injustices, the employment equity legislation has clearly failed.”

The enforcement of the act and its associated regulations will necessitate 10,000 labor inspectors from the Department of Employment and Labour.

Minister of Employment and Labour Nomakhosazana Meth has commended the EEAA for alleviating regulatory burdens on small businesses, enabling them to concentrate on growth rather than compliance.

Companies with more than 50 employees will need to obtain compliance certificates to demonstrate their progress towards achieving numerical targets—aiming to rectify enduring inequalities in a labor market where only about 17% of top management roles are occupied by Black individuals, despite their 80% population share.

Employers encouraged to seek advice

Sakeliga and Neasa recommend businesses obtain comprehensive legal counsel regarding the act, taking into consideration their unique situations.

“Employers should aim to reduce their legal exposure while safeguarding their businesses, employees, and clientele against such unconstitutional, impractical, and damaging legislation. This necessitates careful, individualized guidance.”

Read: Employment Equity 2025: A Guide for South African Businesses

Government efforts towards racial transformation in the workplace are starting to encounter resistance after years of passive acceptance and concerns about being marked anti-transformation. That label no longer carries the same weight.

In December 2024, law firm Norton Rose Fulbright (NRF) filed court documents challenging the Legal Sector Code—a framework mandating firm-level targets of 50% Black ownership, voting rights, and executive management positions within five years.

NRF argues that these targets are unrealistic, as Black individuals comprised only 38% of the profession in 2023, and that the enactment of the code was arbitrary, illegal, and procedurally incorrect.

Read:

Follow Moneyweb’s comprehensive finance and business updates on WhatsApp here.