Will South Africa's 2025 Employment Equity targets disrupt international trade?
Image: GCIS
South Africa's newly gazetted sectoral employment equity targets could place the country in breach of several international trade agreements – including the World Trade Organization's General Agreement on Trade in Services (GATS), as well as regional protocols under the African Continental Free Trade Area (AfCFTA).
This is according to Clive Vinti, Head of Research at XA Global Trade Advisors, who says the targets – set to come into effect from September 1 – appear to impose discriminatory limitations on who can be employed in specific sectors, without taking account of the realities of those sectors or the international obligations South Africa has signed up to.
The potential trade implications formed part of the legal challenge launched by the National Employers' Association of South Africa (NEASA) and Sakeliga NPC against the Minister of Employment and Labour. The challenge, announced on July 9, was aimed at halting the implementation of the '2025 Targets' and the underlying regulations.
Vinti argued that numerical quotas based on national race and gender demographics, if enforced without sector-specific capacity considerations, risk breaching international agreements that explicitly prohibit employment caps in service sectors. Under GATS, for example, member states are barred from placing quantitative limits on the number of people that can be employed in any given service sector. The same provisions are mirrored in AfCFTA and Southern African Development Community protocols, where the focus is on promoting access and non-discrimination in trade in services.
In South Africa's case, these equity targets apply to both local and foreign-owned firms operating in the domestic economy. If implemented without regard for the availability of suitably qualified individuals in designated groups, they could act as a barrier to market access, especially for foreign service providers and investors, potentially triggering trade disputes or retaliatory measures.
At the heart of the court application filed by NEASA and Sakeliga is the argument that the 2025 targets, which flow from the insertion of section 15A into the Employment Equity Act (EEA), were adopted in breach of procedural and constitutional requirements.
The amendment, which came into effect on 1 January 2025, grants the Minister of Employment and Labour, Nomakhosazana Meth, the power to set sector-specific numerical employment targets in order to ensure equitable representation at all occupational levels. But the law also requires that such targets be preceded by a public consultation process and that affected sectors be properly identified and engaged.
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According to the applicants, this did not occur.
They allege that instead of the minimum 30-day comment period stipulated in the Act, they were given just over a week to respond. Furthermore, while draft targets had been published for public input in 2023 and 2024, this step was skipped entirely for the 2025 targets.
NEASA and Sakeliga also argued that the consultation process was neither meaningful nor inclusive. Some sessions were limited to 1 000 virtual attendees and held with little to no advance notice. Employers were allegedly only given access to the proposed targets during or shortly before these meetings.
Compounding the procedural issues, the applicants say the Minister used a 'one-size-fits-all' approach in determining the targets – applying blanket increases of 6% to 9% across occupational levels, without regard for each sector's structure, skills availability, growth trajectory, or economic context. This, they argue, rendered the targets arbitrary, irrational and potentially unachievable.
The challenge also raised concerns around the impact on women. While women are themselves a designated group under the EEA, the structure of the targets could, paradoxically, disadvantage them by failing to account for intra-group disparities.
Crucially, the plaintiffs said that no socio-economic impact assessment had been conducted before gazetting the targets. In their view, this omission made the regulations irrational and placed the policy in conflict with section 9 of the Constitution, which deals with the right to equality and non-discrimination.
Beyond constitutional and procedural issues, the applicants highlighted the direct risk to businesses. Companies that fail to meet the new equity targets face penalties of up to R1.5 million or 2% of annual turnover on first offence. Section 53 of the EEA, which is not yet in force, could eventually see non-compliant firms excluded from government procurement processes entirely, with existing state contracts cancelled.
'Since the government is the largest procurer of goods and services in the market, being blocked from trading with it could be fatal to a business,' said Vinti.
The equity targets could also affect access to key trade instruments. Duty rebate, increase and reduction applications, often used to support or protect domestic industries, require compliance with labour legislation. Non-compliance may disqualify firms from benefiting from these instruments, weakening their competitiveness both locally and abroad.
According to Vinti, these developments have the potential to upend South Africa's trade credibility.
The matter is now before the courts, with NEASA and Sakeliga seeking an urgent interim interdict to halt the targets' implementation while the High Court considers the lawfulness and constitutionality of the regulations. 'The ball is now in the court of the Minister,' said Vinti.
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