Government Cracks Down on Non-Compliant Businesses: Fines Up to R1.5 Million or 10% of Turnover
The Department of Employment and Labour has warned that it will take strong action against South African employers who fail to comply with the Employment Equity Act (EEA) and the new racial employment targets introduced in April 2025.
Strict Penalties for Non-Compliance
According to Labour Minister Nomakhosazana Meth, companies that do not meet EEA requirements face two major consequences:
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Loss of EE Compliance Certificate – Non-compliant employers will not receive this certificate, which is mandatory for doing business with the state.
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Heavy Fines – Employers who fail to reach their annual equity targets without a valid reason can be taken to the Labour Court and fined:
What the Employment Equity Act Requires
The updated EEA, effective 1 January 2025, applies to all “designated employers” — businesses with more than 50 employees.
Its goal is to promote workplace equality and fair treatment by addressing disadvantages faced by black people, women, and persons with disabilities.
The law empowers the minister to set specific racial representation targets for 18 economic sectors, which companies must meet within five years. These sectoral targets were officially gazetted in April 2025.
Criticism and Legal Challenges
Business groups, including Sakeliga, NEASA, and Business Unity South Africa, are challenging the new laws in court, arguing that they amount to rigid racial quotas that are unconstitutional and harmful to business growth.
Critics warn that the rules could deter investment, limit expansion, and lead to job losses as companies seek friendlier markets.
The department disputes these claims, insisting that:
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The targets are flexible five-year goals, not quotas.
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Companies can deviate from them for justifiable reasons, such as:
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Limited recruitment or promotion opportunities
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A lack of suitably qualified candidates
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Mergers, acquisitions, or business transfers
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Economic pressures or legal rulings
Impact on Small Businesses
Smaller companies with fewer than 50 employees are exempt from meeting the targets but must still comply with anti-discrimination laws.
The minister said this exemption reduces red tape and allows small businesses to grow and create jobs over time.
Compliance Timeline
Although the department is warning of penalties, Meth clarified that compliance checks will only begin in 2026.
“It is premature at this stage to assess compliance,” Meth said. “The first evaluations will take place during the 2026 reporting period.”
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