Employment Equity in South Africa - MBA Dissertation

MBA Dissertation (Awarded Distinction 2002) Employment Equity and SMEs

South Africa

BUCKINGHAMSHIRE CHILTERNS UNIVERSITY COLLEGE

BUCKINGHAMSHIRE BUSINESS SCHOOL

MBA

“A Study of Small and Medium Business Operations within the

Confines Prescribed by the Employment Equity Act, with Particular

Reference to KwaZulu-Natal.”

2002

Chris David Bohr

BUCKINGHAMSHIRE CHILTERNS UNIVERSITY COLLEGE

BUCKINGHAMSHIRE BUSINESS SCHOOL

MBA

“A Study of Small and Medium Business Operations within the

Confines Prescribed by the Employment Equity Act, with Particular

Reference to KwaZulu-Natal.”

A dissertation submitted to Buckinghamshire Chilterns University College, in partial

fulfilment of the requirements for the degree of Master of Business Administration.

2002

Chris David Bohr

Supervisor: Dr D Padalkar

I

DECLARATION

I, Christopher David Bohr, do declare that this dissertation, titled:

“A Study of Small and Medium Business Operations within the Confines Prescribed by the

Employment Equity Act, with Particular Reference to KwaZulu-Natal.”

Submitted by me for the Master of Business Administration (MBA) Degree at the

Buckinghamshire Chilterns University College has not been submitted previously for a

degree done at this or at any other University. I further declare that it is my own work in

design and in execution and that all sources consulted and used have been indicated and

acknowledged by means of complete references.

Signed: ………………………………………

Christopher David Bohr

Dated: ……………………………………….

II

TABLE OF CONTENTS

DECLARATION I

TABLE OF CONTENTS II

TABLE OF TABLES IX

TABLE OF FIGURES XI

ACKNOWLEDGEMENTS XII

TERMS OF REFERENCE XIII

AIM XV

OBJECTIVES XVI

EXECUTIVE SUMMARY XVIII

CHAPTER 1

INTRODUCTION 1

1.1 APPLICATION OF THE EMPLOYMENT EQUITY ACT 2

1.2 BACKGROUND 4

1.3 THE PERCEIVED PROBLEM AND THE NEED FOR RESEARCH 4

1.4 CONSTRAINTS AND LIMITATIONS 6

1.5 DEFINITIONS 6

1.5.1 THE EMPLOYMENT EQUITY ACT (EEA) 6 1.5.2 DESIGNATED EMPLOYER 6

1.6 THE HYPOTHESIS 7

1.7 SUMMARY 7

III

CHAPTER 2

LITERATURE REVIEW AND PROBLEM STATEMENT 9

2.1 INTRODUCTION 9

2.2 THE RESEARCH PROBLEM 9

2.2.1 CULTURAL INFLUENCES 10

2.3 THE CONCEPT OF ADAPTATION BY SMALL BUSINESS 12

2.3.1 INTRODUCTION 12 2.3.2 ADAPTATION TO CHANGE 13 2.3.3 AMBIGUITY 15 2.3.4 LOCUS OF CONTROL 15 2.3.5 THE PROPENSITY TO TAKE RISKS 16

2.4 THE ADVANTAGES OF DEVELOPING SMES 17

2.4.1 DEFINING CREATIVITY 19

2.5 UNDERSTANDING ‘THE MECHANICS’ OF SMES 19

2.5.1 INTRODUCTION 19 2.5.2 THE ENVIRONMENT 20 2.5.3 ORGANIZATIONAL ISSUES 21 2.5.4 MANAGEMENT CHARACTERISTICS: “THE ENTREPRENEUR” 22 2.5.5 CONCLUSION ACCORDING TO MAAS AND DE CONING (1999) 23

2.6 THE ROAD TO THE EEA - AFFIRMATIVE ACTION LAID THE

FOUNDATIONS 25

2.6.1 THE RELEVANCE OF THE EEA TO ECONOMIC GROWTH 27 2.6.2 INTERPRETIVE DIFFERENCES REGARDING

AFFIRMATIVE ACTION 29

2.7 VIEWS ON THE CONSEQUENCES OF THE EEA 32

2.7.1 REVIEWING THE INTERPRETATION AND SOME

OF THE EFFECTS OF THE EEA 33

IV

2.7.2 THE RELEVANCE OF THE EEA ON BUSINESS 35

2.8 SOUTH AFRICAN SKILLS MIGRATION 38

2.8.1 INTRODUCTION 38 2.8.2 WHO NEEDS SKILLED PEOPLE? 40

CHAPTER 3

METHODOLOGY 43

3.1 INTRODUCTION 43

3.2 RESEARCH PARADIGMS 44

3.2.1 QUANTITATIVE RESEARCH METHODS 44 3.2.2 QUALITATIVE RESEARCH METHODS 45 3.2.3 TRIANGULATION 46

3.2.4 DATA GATHERING 46 3.2.4.1 Observational Studies 46 3.2.4.2 Literature Review 47 3.2.4.3 Telephonic Interviews 47 3.2.4.4 Face To Face Interviews 48 3.2.4.5 Questionnaire 49

CHAPTER 4

FINDINGS OF THE STUDY 51

4.1 INTRODUCTION 51

4.2 PROFILES OF THE SME GROUPS 51

4.3 HAS THE BUSINESS ENVIRONMENT CHANGED? 53

4.4 CHANGES IN BUSINESS TURNOVER 56

4.5 CHANGES IN EMPLOYEE BASE 58

4.6 HAS MANAGEMENT GROWTH OCCURRED AS

PRESCRIBED BY THE EMPLOYMENT EQUITY ACT? 62

V

4.7 HAS THE EEA HAD AN EFFECT ON PERSONNEL

MANAGEMENT? 65

4.8 WHAT EFFECT DOES GOVERNMENT LEGISLATION

HAVE ON PERSONNEL MANAGEMENT? 68

4.9 DOES THE EEA COMPROMISE THE FREEDOM OF

CHOICE IN EMPLOYING THE BEST PERSON FOR THE JOB? 71

4.10 SURVEY RESULTS ON WHETHER RACIAL ATTITUDE

HAS CHANGED IN THE WORKPLACE SINCE THE

INTRODUCTION OF THE EEA 73

4.11 SURVEY RESULTS ON WHETHER THE EEA HAS AFFECTED

THE PROFITABILITY AND EFFICIENCY OF BUSINESS 76

4.12 SURVEY RESULTS OF BUSINESS PEOPLE WHO KNOW OF OTHER

BUSINESS OWNERS WHO HAVE LEFT SOUTH AFRICA FOR THE REASONS OF

AFFIRMATIVE ACTION/EEA DIRECTIVES; FUTURE EMPLOYMENT

PROSPECTS FOR THEIR CHILDREN; LOSS OF FULL CONTROL OF THEIR

BUSINESSES; REVERSE DISCRIMINATION ON BUSINESS DEALINGS 79

4.13 RESULTS DRAWN FROM INTERVIEWS 81

4.13.1 INTRODUCTION 81 4.13.2 PROFILES OF THE INTERVIEWEES: A.1 TO A7 82 4.13.3 TABULATED RESULTS FROM THE INTERVIEW PROCESS 83

4.13.3.1 Issue: Application of Affirmative Action and the EEA 83 4.13.2.2 Issue: Businesses that have ceased trading or downsized 84 4.13.2.3 Issue: Quality of Service and Workmanship 85 4.13.2.4 Issue: The benefits of the EEA to their business 86 4.13.2.5 Issue: Freedom of choice in choosing the best person

for the job 87 4.13.2.6 Issue: Racial Attitudes 88 4.13.2.7 Issue: Profitability and Efficiency within the Business 89 4.13.2.8 Issue: Knowledge of other SMEs that are growing well 90

VI

CHAPTER 5

DISCUSSION AND ANALYSIS OF FINDINGS 91

5.1 INTRODUCTION 91

5.1.1 RESTATEMENT OF THE RESEARCH OBJECTIVE 91

5.2 DISCUSSION APPLICABLE TO THE RESEARCH OBJECTIVES 92

5.2.1 ADAPTATION TO CHANGE 94 5.2.2 AMBIGUITY 95

5.2.2.1 Racial Attitudes 97

5.2.3 LOCUS OF CONTROL 98 5.2.3.1 Freedom of Choice 99 5.2.3.2 Personnel Management 100

5.2.4 THE PROPENSITY TO TAKE RISKS 102 5.2.4.1 Quality of Service and Workmanship 103

5.3 DEVELOPING SMALL AND MEDIUM SIZED ENTERPRISES 105

5.3.1 TRENDS FOR THE FUTURE 106 5.3.1.1 Profitability and Efficiency 106 5.3.1.2 The Loss of Skills, Training and Experience 107

5.4 ECONOMIC OR EMPLOYEE GROWTH 108

5.4.1 THE RELEVANCE OF THE EEA TO ECONOMIC GROWTH 109

5.5 OBJECTIVES REALISED 111

CHAPTER 6

CONCLUSIONS AND RECOMMENDATIONS 112

6.1 CONCLUSIONS 112

6.1.1 THE HYPOTHESIS 112 6.1.2 WHO IS REALLY BENEFITING - BLACK OR AFRICAN SMES? 113 6.1.3 GOVERNMENT BODIES 113 6.1.4 LARGE ORGANIZATIONS 114

VII

6.1.5 SMES 115

6.2 RECOMMENDATIONS 116

6.2.1 OBJECTIVES REALISED 117 6.2.1.1 Objective 4 117 6.2.1.2 Objective 5 118

6.2.2 CLOSING STATEMENT 119

BIBLIOGRAPHY 121

1.0 BOOKS 121

2.0 JOURNALS AND PAPERS 124

3.0 PERIODICALS 128

4.0 OFFICIAL PUBLICATIONS 129

5.0 INTERNET SOURCES 129

APPENDICES 132

APPENDIX I: USER GUIDE ON THE EEA , SUPPLIED

BY THE DEPARTMENT OF LABOUR 132

APPENDIX IA: SUMMARY OF THE

EMPLOYMENT EQUITY ACT 55 OF 1998 (EEA) 137

APPENDIX II: SAMPLE OF QUESTIONNAIRE DISTRIBUTED

TO SME GROUPS FOR COMPLETION 144

II.1 SAMPLE COVERING LETTER 145

II.2 SAMPLE OF QUESTIONNAIRE 146

VIII

APPENDIX III: TRANSCRIPTS OF CONDUCTED INTERVIEWS 155

III.1 INTRODUCTION AND INTERVIEW SCHEDULE 155

III.2 INTERVIEW WITH A.1 155







APPENDIX IV: EXTRACT OF THE FINDINGS BY THE

SOUTHERN AFRICAN MIGRATION PROJECT, SERIES 18 190

APPENDIX V: EXTRACTS FROM THE MOST RECENT

SAMP REPORTS 193

V.1 SKILLS FLIGHT CHALLENGES GOVERNMENT (CAPE TOWN,

DISPATCH ONLINE, 30/10) 193

V.2 SA'S BRAIN DRAIN UNDER SPOTLIGHT IN PARLIAMENT

(SABC NEWS, 30/10) 194

V.3 MPS TO DEBATE BRAIN DRAIN (PARLIAMENT, SAPA, 22/10) 194

V.4 IT PROFESSIONALS RETURN TO SA (BUSINESS DAY, 22/10) 195

V.5 IMMIGRATION ACT MISSES MARK ON SKILLED LABOUR

(BUSINESS DAY, 03/10) 195

APPENDIX VI: THE ECONOMIC CONTRIBUTION OF SMES

-EXTRACTS FROM THE NATIONAL TREASURY REVIEW 2002 198

IX

TABLE OF TABLES

Table 4.0: The SME types and their respective Group make-up. 52

Table 4.1: The number of SMEs who feel the business environment HAS CHANGED

FOR THE BETTER since the introduction of the Employment Equity Act. 53

Table 4.2: The number of SMEs who feel the business environment HAS NOT CHANGED

since the introduction of the Employment Equity Act. 54

Table 4.3: The number of SMEs who feel the business environment HAS CHANGED

FOR THE WORSE since the introduction of the Employment Equity Act. 55

Table 4.4: The number of SMEs who feel the business turnover HAS CHANGED


Table 4.5: The number of SMEs who feel the business turnover HAS CHANGED


Table 4.6: The numbers of SMEs who state that their employee base HAS INCREASED


Table 4.7: The number of SMEs who state that their employee base HAS NOT CHANGED


Table 4.8: The number of SMEs who state that their employee base HAS DECREASED


Table 4.9: The number of SMEs who state that management growth HAS INCREASED


Table 4.10: The number of SMEs who state that there has been NO MANAGEMENT GROWTH


Table 4.11 The number of SMEs who state that MANAGEMENT GROWTH HAS DECREASED


Table 4.12: The number of SMEs who state that the Employment Equity Act HAS A LARGE

EFFECT on personnel management since its introduction. 65

Table 4.13: The number of SMEs who state that the Employment Equity Act HAS NO


Table 4.14: The number of SMEs who state that the Employment Equity Act HAS LITTLE


Table 4.15 The number of SMEs who state that Government Legislation affecting personnel

management IS NECESSARY AND GOOD THING. 68

X

Table 4.17: The number of SMEs who state that they are NOT BOTHERED by Government

Legislation affecting personnel management. 70

Table 4.18: The number of SMEs who state that the EEA COMPROMISES THE FREEDOM

OF CHOICE in employing the best person for the job. 71

Table 4.19: The number of SMEs who state that racial attitude HAS CHANGED FOR THE

BETTER since the introduction of the Employment Equity Act. 73

Table 4.20: The number of SMEs who state that racial attitude HAS CHANGED FOR THE

WORSE since the introduction of the Employment Equity Act. 74

Table 4.21: The number of SMEs who state that profitability and efficiency HAS CHANGED


Table 4.22: The number of SMEs who state that profitability and efficiency HAS CHANGED


Table 4.23: The number of SMEs who state that profitability and efficiency HAS NOT

CHANGED since the introduction of the Employment Equity Act. 78

Table 4.24: The number who state that they know of other business people who have left

South Africa for the reasons stated in 4.12 above. 80

Table 4.25: Profiles of the Interviewees. 82

Table 4.26: Application of Affirmative Action and the EEA. 83

Table 4.27: Businesses that have ceased trading or downsized. 84

Table 4.28: Quality of service and workmanship. 85

Table 4.29: Whether the EEA has been beneficial to their business. 86

Table 4.30: Freedom of choice in choosing the best person for the job. 87

Table 4.31: Whether racism has increased in the workplace. 88

Table 4.32: Whether profitability and efficiency has changed within the business? 89

Table 4.33: Knowledge of other SMEs that are growing well. 90

XI

TABLE OF FIGURES

Figure 5.1 : Chapter I – Definitions, purpose, interpretation and application. – Purpose. 92

Figure 5.2 : Chapter I – Definitions, purpose, interpretation and application. - Ambiguity 95

Figure 5.3 : Chapter II - Prohibition of Unfair Discrimination 96

Figure 5.4 : Application of the Act: Section 4 - The definition of a Designated Employer. 96

XII

ACKNOWLEDGEMENTS

I would like to record my grateful thanks to Dr Padalkar for her guidance and advice

during the preparation of this work. Her experience ensured that this dissertation was

adequately planned, researched and presented. Thanks are due to my children, Stuart and

Kerin in forgiving me the times when my full attention to their needs for fatherly

interaction was less than one hundred per cent. Also my thanks go to Haley Canham who

provided her time and efforts in proof reading and contributing valuable perspectives to

issues of culture not fully appreciated by the researcher.

A special word of thanks goes to University of Zululand Librarian Lyudmila Ocholla, for

her efforts to find suitable literature sources for me. Her smile and dedication to students

such as myself made the hard work that much more pleasurable.

This work could never have been completed without the co-operation of all who so

willingly participated in field research. I would like to record my thanks to each and every

organization and participant that provided advice, support, information and of course

criticism. A heartfelt debt of gratitude is conveyed to Alec Bozas who has provided

constant encouragement from the beginning to very end of this MBA degree course over

the past three and a half years, and to Mike Rossouw whose experience and knowledge has

provided much inspiration and support.

XIII

TERMS OF REFERENCE

Concern with stagnant and negative growth of some sampled small and medium businesses

in South Africa, influenced the decision to study the chosen topic. The blame appears to

have been laid at the government’s door because of the introduction of the Employment

Equity Act 1998 (Department of Labour, 2000), referred to as the EEA and the Act within

the text of this dissertation. South Africa has a legacy of discrimination in relation to race,

gender and disability that has denied access to opportunities for education, employment,

promotion and wealth creation to the majority of South Africans. According to the South

African Government, the Employment Equity Act was passed to address this legacy and

has two main objectives:

• To ensure the workplaces are free of discrimination; and

• To ensure that employers take active steps to promote employment equity.

Appendix I provides a guide to employers supplied by the Department of Labour (2000a).

The guide gives an insight to the reasons and workings of the Act in general terms.

There was a need to study various businesses and their issues in relation to the

consequences of the Act. Whether the new Act was detrimental to emerging or established

small and medium businesses in South Africa would be the basis of the study. The

management concepts employed aim at identifying the problems small and medium

businesses or enterprises (SMEs), experience in the world of commerce and industry. The

concepts also aim at understanding how they can be applied and managed to solve business

issues. White male business-owners are focussed for particular attention within this

XIV

dissertation as interpretation of the Act places them at disadvantage for choice as

supplier/contractor, unless certain conditions from the Act are met. The reasoning for this

is found in the interpretation of the Act as follows:

• The Employment Equity Act prescribes actions (Appendix Ia), amongst others, in

the removal of racial discrimination within the workplace.

• The Act refers to people previously disadvantaged [under the past South African

Government’s apartheid employment policies as defined by the Department of

Labour (2000a)]. Reference is made within the Act to these people of being from a

Designated Group.

• The Act defines a Designated Group as being Black people, women or people with

disabilities (Appendix Ia: Paragraph 1.2, Sub. (d)).

• The term Black is further defined by the Department of Labour (2000a). It states

that Designated Groups are: ‘… Black people, which means Africans, Coloureds

and Indians…’

The employment of White males [and their own businesses] by Designated employers

is not considered appropriate in the promotion of equal opportunity and fair treatment.

White males are regarded as previously advantaged. How this affects White SMEs

forms a point of focus for this dissertation. The term Designated Employer is defined in

Appendix Ia, Section 1, sub.1.2 (c).

XV

The Act makes use of the descriptive terminologies ‘Black, White, African, Indian and

Coloured’. They are used within this dissertation, as they form important points of

reference.

AIM

The aim of this dissertation is to study the South African business sector within the

confines prescribed by the Employment Equity Act. The focus is on small and medium

businesses, both emerging and well established. In addition, the investigation aims to

discover whether the Act has affected business and the economy as well as placing South

Africa at a disadvantage in competing for foreign markets. The purpose is to form a

representative sample of various businesses and of the people who own them. One hundred

and thirty-seven small and medium businesses are sampled from various centres within the

KwaZulu Natal region. The study, through investigation, is aimed at identifying whether

some small and medium businesses are given preferential status, in lieu of the Act, as

supplier/contractor to larger businesses and government bodies, to the detriment of quality

and expertise.

A smaller sample of large business and government bodies is taken. The reason for taking

this smaller sample is due to the power each of these bodies have in employing large

numbers of contractors and suppliers. The ratio of SMEs sampled to the sample of large

business and government bodies is considered representative for this study. The study

should reveal if management concepts are used to circumvent any limiting factors the Act

places on White owned businesses.

XVI

OBJECTIVES

1. To analyse the external and internal issues of how the Act affects small and

medium businesses.

2. To analyse and compare businesses that are both directly and indirectly affected

by the Act.

3. To analyse and determine whether the Act has limited the quality and

experience levels available to supplied larger companies and government

bodies.

4. To consider possible management tools and frameworks, in order that solutions

can be found for small and medium businesses that feel constrained by the Act.

5. To suggest a broad strategy for owners of small emerging/established

businesses to transform them into financially sound and growing businesses

without sacrificing quality and experience.

The terms of reference focus on certain parts of the re-engineering process that the Act

believes is crucial to the survival and growth of previously disadvantaged people. The

White population of South Africa benefited under the past apartheid policies. The best

education and employment opportunities where made available to Whites whereas the

Black population was not afforded such. It is the Black population that the present

government term as the previously disadvantaged. The Act prescribes to rectify the

imbalance and empower those previously disadvantaged to actively take part and

contribute meaningfully to the to the South African economy. The Black population now

XVII

has access to actively participates in business. As a consequence of this, the Employment

Equity Act has been applied to provide equal opportunity and correct the imbalance in the

SME sector.

XVIII

EXECUTIVE SUMMARY

This study and investigation into whether the Act is affecting small business is prompted

by the researcher’s first hand experience in the small and medium business environment.

After more than ten year’s of seeing growth and expansion of White owned businesses,

these businesses are no longer attributed preferential supplier status. The businesses are

made up of various contractors and specialist suppliers of services and products. These

businesses are well known and chosen by big companies and government concerns in the

past for the their highest available quality and experience. For example, the pilot study

revealed that after the introduction of the Employment Equity Act, these business receive a

lower demand for their services. In addition they are paid for their services well past the 30

day due date for accounts payable. In contrast designated businesses are employed

preferentially and are paid for their services ahead of the due date.

Despite these changing factors, some White-owned businesses have adapted and survive

successfully. It is the instance of other White owned businesses suddenly disappearing,

shrinking or experiencing financial problems that prompts this research to investigate

further.

South Africa’s history has provided White males with excellent education and business

opportunities. This has contributed greatly to the vast experience base within the South

African business management sector. It has been suggested that this is to the detriment of

the other population groups, a sector for which the EEA has been established to address.

The research process, which includes a survey, interviews and a literature review,

XIX

identifies both strengths and weaknesses implicated within the conditions prescribed by the

Act.

The study is conducted over two years and uses the method of triangulation. Results from

an initial pilot study, conducted by the researcher, support the view that some small and

medium White businesses fail because of preferential status being given to the previously

disadvantaged-owned or managed businesses. The pilot study reveals that this is regardless

of the standard of quality and experience. In fact some large organizations have found

themselves in a dilemma, sacrificing quality and service in order to conform with the Act.

In lieu of this, large companies and government organizations change their supplier to

conform with the prescription of the Act, rather than for economic reasons. Some White

SMEs have used their entrepreneurial skills to adapt and continue business with these large

organizations.

The study and investigations combine to produce a way forward where all business parties

can work together and achieve the aims of the Employment Equity Act, without affecting

the foundations that good and successful business is built upon.

Recommendations are made at the completion of the investigation with reference to

conclusions drawn from within the study.

1

CHAPTER 1

INTRODUCTION

Owners of businesses, particularly those White male owners who have provided supplies

or services to government and government bodies have found that the Act has been

detrimental to their business operations. Such instances have occurred because the owner

has resisted in complying with the requirement that the business should be Black-owned or

have at least a half-share of the business.

Some White-owned businesses may have gone as far as to window-dress (tokenism) their

company and place a previously disadvantaged person in the position of co-owner. This

form of tokenism is out of context in what the Act prescribes, and defeats the Act’s

objectives. Perhaps White business owners have implemented this modus operandi to

survive and be seen as achieving the requirements of their customers.

The study intends to discover how the large companies, and government bodies

(parastatals), have applied the directives of the Employment Equity Act on Small and

Medium Enterprises.

The investigation intends to also analyse and discuss why the application of the Act makes

White business owners feel discriminated against. Small businesses that have grown to an

appreciable size and employing those previously disadvantaged at all levels, may be very

resistant to the idea of placing a previously disadvantaged person into a management

2

position that could be recognised as tokenism. Undoubtedly, government bodies providing

work for supplier companies will require those suppliers to adhere by the rules laid down

within the Act. Consequently, non-adherence to such rules could cause suppliers to lose

business and possibly go out of business. Others may have taken the tokenism route, with

the result of an unsuitably qualified and inexperienced person in a position that could be to

the detriment of the business. Understandably, these suppliers also stand to lose business

and may have placed themselves at risk for survival. Some small and medium businesses

may have followed the big company route and fast-tracked suitable Black management

incumbents. The cost of training could reduce their profit margin and they could risk the

potential loss of this person to a rival firm. It is hoped that this dissertation will provide an

aid by giving an insight to other businesses’ experiences and how obstacles could be

overcome. The term Small and Medium Enterprises (SMEs) will be used in the general

context of small businesses comprising all Race Groups inclusive of gender specifications.

1.1 APPLICATION OF THE EMPLOYMENT EQUITY ACT

Larger organisations look to enforce Section 3.2, Affirmative Action Measures: Section 15

of the Act, (Appendix Ia) on suppliers of services. The EEA is thus interpreted as requiring

large companies or governmental organizations to supply work preferentially to African,

Indian, and Coloured-owned businesses even if White-owned businesses are currently

utilised. Interestingly,. statistics provided in a review provided by the National Treasury

(2002:40) of South Africa reports that:

• In terms of racial composition, SMEs are largely dominated by ‘white

ownership’ [73%; Previously disadvantaged: 27%]. This is due mainly to

3

the legacy of the past socio-economic dispensation. It is probable, however,

that the pattern is changing, with African, Asian and Coloured ownership

(which is prevalent in micro-enterprises) slowly reaching the threshold of

SMEs. However, there are no statistics available to confirm this hypothesis.

Observational study suggests that small White-owned businesses will no longer benefit

from government contracts or large company business dealings unless there is a suitably

qualified employee, from the Designated Group, being owner or partner.

The country relies on SMEs for people empowerment and economic growth. They may

find the financial burden and their freedom of choice to manage and develop their

businesses severely hampered. Support for the role of SMEs in the economy is provided by

The Information Bank of the Small Business Development Corporation (1985:2) by

stating:

Indeed, in South Africa, The Small Business Development Corporation has

declared that small business [SMEs] plays a vital role in the South African

economy. They create jobs, foster innovation and provide opportunities for all

population groups to share the wealth of a nation.

It is possible that entrepreneurial spirit and drive could be dampened by imposition of

government legislation stipulating that it must contribute to the upliftment of previously

disadvantaged people. This could present a view by SMEs that the Act is a demand to

provide welfare and charity instead of primarily supplying to buyers’ needs and becoming

Comment: Business Times “ Big Business Backs Small Enterprise” 16th June 1985 :10, in The Small Business Survival Kit Booklet No.1:2, Information Bank of the Small Business Development Corporation April 1985.

4

a profit making concern. The value of the study is also to evaluate whether the Act has held

back or severely hampered the growth of SMEs.

1.2 BACKGROUND

The researcher is British born and immigrated to South Africa in 1982. After having

worked for both private companies and a parastatal, he became manager and a hands-on

employee within his own SME. Since 1988, he has provided services to parastatals such as

Telkom and Eskom as well as private companies. As a result, the experience gained from

this association is drawn on for this study in investigating how the Employment Equity Act

affects SMEs.

1.3 THE PERCEIVED PROBLEM AND THE NEED FOR RESEARCH

Observational studies identify that the Employment Equity Act adversely affects small,

mainly White-owned businesses. These White SMEs view this as unjust and

discriminative. Pilot interviews with small business owners and representatives of larger

organisations reveal that White-owned SMEs assume that previously disadvantaged

businesses are inferior in business experience and knowledge. They are confused as to why

they were awarded business based on best experience, only to have it taken away because

the Act allows affirmative action measures to be instituted. This confusion arises by the

interpretation of the Act (Appendix Ia: Section 2, Chapter II subsections: 2.1, 2.2 and

Section 3, Chapter III subsection: 3.1 paragraph [a] ).

5

The survival of SMEs requires a large demand for their services, to provide work and gain

financial reward if the objective is to grow larger and more profitable. How important the

growth of small business is to the economy, is illustrated in Peters and Waterman’s In

Search of Excellence (1984:200). They quote that:

Research by the National Science Foundation found small firms produce about four

times as many innovations per research and development dollar as medium-sized

firms and about twenty-four times as much as large firms. According to work done

by Burton Klein (1977), major firms are seldom ever responsible for the major

advances in their industries. Further evidence supports this in research carried out

by Veronica Stolte-Heiskanen (1980). She found that the result was roughly the

same in a study of fifty private and public sector research laboratories.

If this is true, one may propose that business evolution and growth has its major roots

stemming from small businesses.

A perceived problem can exist if government directives affect the natural flow and

evolution of SMEs. Of course, should this be the case, this study will help to determine

whether the Act will: lead SMEs to evolve to eventual extinction; retard SME growth; or

promote a new business evolution. In addition, the study could reinforce that there is a

perceived problem witnessed by White SME closure or disposure of their businesses.

Some may leave the country for new ventures (Economist, February 24, 2001). The

investigation will also determine whether the Act has contributed to the declining presence

of White-owned or, in fact any, SME in South Africa.

Comment: PETERS, T. J.and WATERMAN, R. H. (1984). In Search of Excellence. Lessons from America’s Best Run Companies. Warner Books: New York.

Comment: KLEIN, B. H. Dynamic Economics, (Cambridge, Mass.: Harvard University Press, 1977). In Inc., April 1981:44

Comment: STOLTE-HEISKANEN, V. Blume. “A Managerial View of Research,” Science, Jan. 4 1980:48.

Comment: ECONOMIST, Over the Rainbow, 24/02/2001, Vol. 358. Issue 8210:14, 2p.

6

1.4 CONSTRAINTS AND LIMITATIONS

The limitations of the study are that it seeks to find solutions, within the abilities and

actions of business managers and owners, to what is prescribed by the Employment Equity

Act. Solutions found indicate that revised or new legislation may require lobbying within

political environs, an area beyond the scope of this investigation. Input from leading South

African industrialists needs to be obtained to cross check results of the research, which

covers the province of KwaZulu-Natal. Among specialists interviewed are academics,

human resource specialists, and managers responsible for administering the requirements

of the Employment Equity Act on behalf of their company.

1.5 DEFINITIONS

1.5.1 THE EMPLOYMENT EQUITY ACT (EEA)

The Act is a 'Key' and an enabling tool. For workers it will help open doors by

removing discriminatory barriers of the past. It should give access to training, new

opportunities and promotion. For managers it will give a more productive

workforce, better trained, and motivated, to help make a company more efficient

and competitive. For previously disadvantaged business owners, it will provide new

work and opportunities to grow and provide greater employment.

1.5.2 DESIGNATED EMPLOYER

Designated Employers are defined as all municipalities and organs of the state

(except local governments, the National Defence, the National Intelligence Agency

7

and the South African Secret Service), and those employing more than 50 people,

or those with fewer than 50 employees but with a total turnover equal to or greater

than the turnover of that of a small business (ranging from two million Rand in

agriculture to 15 million in retail and motor trade).

Designated Employers also include any employer bound by a collective bargaining

agreement under the Labour Relations Act and appointed as a ‘designated

employer.’ A Designated Employer, employing less than fifty employees, may

apply for designated status. Appendix Ia provides a summary of the Employment

Equity Act.

1.6 THE HYPOTHESIS

This research is conducted on the basis that Black SMEs are being preferentially chosen as

suppliers of services and product to large organizations and government bodies, based on

being previously disadvantaged business entities, to the detriment of quality and

experience. The consequences could result negatively on the economic growth of South

Africa.

1.7 SUMMARY

This study seeks to discover the factors that have contributed to the belief by White SMEs

that the Employment Equity Act is detrimental to the future success of their business,

within the constraints and limitations of this study. Internal and external issues are

8

addressed by considering the locus of control within SMEs. Internal issues are the need to

assess the quality of management and to combat apathy. External issues are the effects that

government legislation, the economy and recessive conditions in the world markets have

on businesses in South Africa. The research studies the ability and qualities of business to

adapt to these issues. In addition, the effect on the South African economy is addressed by

investigating the probable emigration of skilled White businessmen, with their families and

perhaps their businesses.

The constraints and limitations are sound, realistic, acceptable and justified, given the

focus of the research. Though the research has limitations it should produce

recommendations, which will assist affected small and medium-enterprise owners to

improve their situation. The following chapter presents the secondary resources of a

literature review applicable to the study and the problem statement.

9

CHAPTER 2

LITERATURE REVIEW AND PROBLEM STATEMENT

2.1 INTRODUCTION

The previous chapter has introduced the need for the study on how SMEs are operating

within the confines prescribed by the Employment Equity Act. This chapter expands the

topic further. A literature review provides the reference points for this dissertation and

refers to summaries of the Employment Equity Act 55 of 1998 (EEA).

Reference is made to writers and researchers who are able to provide meaningful

contribution to this research.

2.2 THE RESEARCH PROBLEM

The investigation probes for answers to perceived problematic issues that have

materialised as a result of the introduction of the Employment Equity Act. The problem of

sustaining small business growth, with the inherent influence of the EEA, also needs

consideration within the context of the wider forces that impact upon it. The global,

regional, national and local environments have influenced the risks businesses take to

adapt to the needs of the customer. The EEA places opportunity for those previously

disadvantaged groups in order for them to contribute to the economy of the country.

Whether those groups have the entrepreneurial ingredient to succeed and survive is to be

10

discovered by way of survey, questionnaire and subsequent analysis. Whatever happens,

the previously Disadvantaged Group certainly appears to have an edge on the White SME.

However, White SMEs have been a valuable contributor to the economy in the past. In

South Africa, SMEs, according to the Department of Trade and Industry (2000), accounted

for 33% of the Gross Domestic Product (GDP). Their response to what they perceive as

reverse discrimination may contribute to a motivation to leave South Africa. These White

SMEs have, without doubt, valuable skills and experience from which other ‘novice’

business people could learn by. Should the psychological effect of feeling alienated in their

own country by affirmative action be compounded by what they perceive as discrimination

on their business as well? The problem of potential loss of these skilled people and their

families and its economic effect is studied within this literature review. The economic

contribution of SMEs is provided for by a review conducted by the National Treasury

(2002:42-45) of South Africa and is presented in Appendix VI for reference.

2.2.1 CULTURAL INFLUENCES

Pilot interviews revealed that there is a cultural factor that needs further

consideration. A point expressed is that Europeans and Indians have several

hundred years of inborn business attributes. The native Black African has been

comparatively void of the entrepreneurial attributes of being ‘a risk taker’, a term in

the industrial western world often associated with being an entrepreneur. Whether

this is contributory to the poor view of White business owners have about Black

SMEs is outside the scope of this dissertation and further research would be

needed.

11

The literature review provides some important factors that contribute to the success

of SMEs. The factor of taking risks in business can be interpreted as being able to

make important decisions to move forward where others hold back, thereby seizing

the opportunity of competitive advantage.

The introduction of the EEA provides opportunity, finance and training for

previously disadvantaged groups. The question arises that if that group is unable to

successfully take up the challenge of conducting business without the risk-taking

factor in their make-up, will their business ultimately fail? The EEA places the

previously advantaged groups last in line for conducting their business with large

organizations. This could be interpreted that the natural selection process of

business survival and success has been interfered with. There again, if it is true,

existing successful SMEs could be placed at a disadvantage and could move to

extinction. Has the government introduced a factor that will upset the natural

equilibrium that should exist in the business arena? By alienating existing

successful small and medium enterprises that are of the White majority, causing

discontent and rejection, will they too collapse and leave small enterprise in the

hands of those who may feel out of their depth when problems, important decisions

and risks need to be made? Complimentary research outside the scope of this study

would be required.

12

2.3 THE CONCEPT OF ADAPTATION BY SMALL BUSINESS

2.3.1 INTRODUCTION

From the beginning of time when services or goods were required by one party of

another an exchange of ‘payment’ for such was required. Early times used the

system of bartering. For example, if one ‘Neanderthal’ entrepreneur had a need for

herbs and spices and he was an excellent hunter, he would barter some of the extra

mammoth he had left over for the herbs and spices that his fellow trader had above

his needs. As years passed by and man became more civilised, and utilised the

process of adaptation as well, our early man in business had to deal with coinage as

a means of trading and payment. Coinage certainly had a better shelf life than

mammoth. There is no doubt that soon after its introduction everyone had to adapt

to the new way of selling and buying goods. The point being made is that business

has had to adapt to its continually changing environment from the very beginning

of its existence. Failing to adapt would lead to isolation and eventual demise.

Today’s business is no exception. The enforcement of laws, trading rights, currency

regulations, taxation requirements and endless more rules, regulations and

conditions has required business to be adaptable to survive. In addition, small

business requires some special qualities for it to be successful. Most of these

qualities are held in what is termed as entrepreneurial spirit – the everlasting-life

elixir that prevents stagnation and eventual death of a business. Adaptation is the

driving force for business survival and for all who benefit by that business.

13

2.3.2 ADAPTATION TO CHANGE

Business is founded on entrepreneurial behaviour according to Nasser and Vivier

(1993:13). And the entrepreneurial personality is not one all-encompassing

personality profile. It is, rather, a range of characteristics that is associated with

entrepreneurial behaviour demonstrated in the works of Kao (1990); Timmons,

Smollen, and Dingee (1990). Yet, certain characteristics are found consistently in

successful owners, even if in varying degrees. Three of the most consistent

characteristics are tolerance of ambiguity, a locus of control that is more internal

than external, and willingness to take calculated risks (Morris and Zahra, 2000).

Strategic adaptation assumes that businesses survive or fail as a function of their

ability to read and interpret patterns in their environment. This ability allows them

to adapt over time and survive. In addition, the key to venture success lies in the

decisions that individual owners make. Quinn (1980), in his study of ten large

organizations, identified managers who had the ability to sense a change in their

environment. In fact, they were able to gradually adapt to those changes,

maintaining a dynamic equilibrium and contributing to their venture’s success.

Managing strategic change is described in detail by Johnson and Scholes

(1999:493-541). They describe the main types of strategic change processes and

define a learning organization. With their frameworks, concepts and techniques in

managing imposed (or forced) change, Johnson and Scholes (1999:493-541)

provide an insight as to how they could be used by SMEs in the process of

adaptation. Still within the same line of thought, Morris and Zahra (2000) believe

Comment: NASSER, M. E. AND VIVIER, F. J. (1993). Mindset for the New Generation Organization. Juta: Kenwyn, South Africa.

Comment: MORRIS, M. H.; ZAHRA, S. Adaptation of the Business Concept over Time: The Case of Historically Disadvantaged South African Owner/Managers. Journal of Small Business Management, Jan2000, Vol. 38 Issue 1, p92, 9p, 1 chart


14

that this ability to adapt is less a function of luck, timing, or access to

resources/information that others do not have, and more a function of the individual

owner's ability to learn.

It is interesting to note that much emphasis is placed on the ‘learning organization’

and the ‘learning manager’ today. Learning refers to the ‘acquisition of new

knowledge by actors who are able and willing to apply that knowledge in making

decisions or influencing others in the organization’ (Miller, 1996:485). Markoczy

(1994:5), on the other hand, refers to the ‘unlearning of old routines as a parallel

activity to the learning of new routines.’ Therefore, the outcome of organizational

learning is that ‘the range of potential behaviours is changed’ (Wilpert, 1995:59).

Consequently, adaptation is the result of learning.

The process of adaptation can be conceptualised in terms of a number of

dimensions affecting the business. This can be viewed as products or services

offered, customer profile, marketing, distribution, personnel, financial

requirements, and physical facilities (Morris and Zahra, 2000).

The government has formulated the EEA to apply to people within business. Thus,

the effects of the EEA become integral with the consequences of adaptation. The

interpretation of the Act and its objectives is vital to its proper implementation.

Comment: MILLER, DANNY (1996). "A Preliminary Typology of Organizational Learning: Synthesizing the Literature," Journal of Management 22(3), 14-25.

Comment: MARKOCZY, LIVIA (1994). "Modes of Organizational Learning: Institutional Change and Hungarian Joint Ventures," International Studies of Management and Organization 24 (December), 62-79.

Comment: WILPERT, B. (1995). "Organizational Behaviour," Annual Review of Psychology 46 (January), 75-93.


15

2.3.3 AMBIGUITY

It is in the context of ambiguity that the non-designated White business-owners are

perhaps interpreting the EEA as having the effect of placing them at a business

disadvantage. The work of Morris and Zahra (2000) leads them to believe that the

issue becomes one of determining how owners approach ambiguity. They add that

an intolerant response to ambiguity can lead to denial and risk-averting behaviour

and while larger organizations can perhaps afford to respond in this manner, small

businesses cannot (Jelinek and Litterer, 1995:137-168). If anything, intolerance of

ambiguity can mean the self-imposition of undesirable internal arbitrary constraints

and structures that stifle the owner’s ability to adapt.

2.3.4 LOCUS OF CONTROL

Morris and Zahra (2000) believe that a business becomes more vulnerable when the

owner has limited control over such variables as customer demand, price,

distribution, financial resources, use of technology or access to raw materials.

Consequently if limited control is introduced concerning staffing the owner may

now also become more vulnerable.

In this respect, Rotter's (1966) locus of control theory states that an individual

perceives the outcome of an event as being either within his personal control and

understanding (internal) or beyond it (external), and hypothesises that individuals

with an internal locus are more likely to strive for achievement. Therefore an

internal locus of control may be associated with a more active effort to affect the

Comment: MORRIS, M. H.; ZAHRA, S. Adaptation of the Business Concept over Time: The Case of Historically Disadvantaged South African Owner/Managers.


Comment: ROTTER, J.B. (1966). "Generalized Expectancies for Internal Versus External Control of Reinforcement,' Psychological Monographs 80(1), 1-7.

16

outcome of the venture through ongoing adjustments (Gasse, 1982:57-71).

Interestingly, Brockhaus (1982:57-71) finds that business owners whose ventures

have survived three years have a greater internal locus of control than those that

have not survived. Whilst another study by Seeman and Evans (1962:126).

demonstrates that internally oriented owners more actively seek out strategic

information and knowledge relevant to their situation. Such scanning behaviour is a

critical requirement for adaptability.

Therefore, when owners find their environment destabilizing, adaptation becomes a

critical strategy. Adaptive firms emphasise flexibility in actively seeking to

leverage, lease, borrow, rent, outsource, or contract for resources. The adaptive

venture can also explore ways to enhance its image, apparent size, and scope of

operation through networking and creative resource leveraging. As a result, they

may find they are better able to influence events by forming strategic alliances and

partnerships. The end-result of such leveraging, networking, and collaborating is a

more fluid business concept, in which there are continuous modifications to all

facets of the enterprise (Morris and Zahra, 2000).

2.3.5 THE PROPENSITY TO TAKE RISKS

According to works of Falbe and Larwood (1995) and Morris (1997) the available

research indicates that established entrepreneurs tend to be moderate risk-takers. In

fact they are risk-acceptors who are often perceived as being risk-oriented or risk

seeking by those who are more risk-averse. Consequently, they make calculated

risk assessments, based on information not available to, or not appreciated by,


Comment: FALBE, C.M., AND L. LARWOOD (1995). "The Context of Entrepreneurial Vision," in Frontiers of Entrepreneurship Research. Ed. W.D. Bygrave, B.J. Bird, S. Birley, N.C. Churchill, M.G. Hay, R. H. Keeley, W.E.Wetzel,Jr. Wellesley, Mass.: Babson College, 187-202.

Comment: MORRIS, MICHAEL H. (1997). Entrepreneurial Intensity. Westport, CT: Quorum Books

17

others. Therefore it may be that the process of small business creation increases the

tolerance for moderate levels of risk, thus causing a larger percentage of established

owners to appear to be moderate risk takers.

However, owners generally do not see themselves as taking excessive risks. They

find themselves surrounded by the uncertainty created by environmental turbulence

and an untested business concept. Accordingly, the increasing uncertainty pushes

them in the direction of accepting risk as a given and developing shorter time frame

for decision response as depicted in the work of Stevenson (1989). Therefore, the

willingness to take risks, at least in the form of making quick decisions without

complete information, is often the most rational choice.

Timmons, Smollen, and Dingee, (1990) found continuously in their work that

successful small business operators are not afraid of failing; rather, they are intent

on succeeding. However, calculated risk-taking implies an awareness of the various

risk factors that surround the venture and their underlying sources. This awareness

also implies recognition of the need to plan for contingencies, making

modifications to one's approach as specific risk factors materialise.

2.4 THE ADVANTAGES OF DEVELOPING SMES

The advantages of developing small and medium-sized enterprises are recognised by

various authors such as Clay & Creigh-Tyte (1994:2). They refer to the job creation role of

SMEs that has outstripped that of larger firms. Claessens (1982:1) states that SMEs have a

Comment: STEVENSON, H.H. (1989). New Business Ventures and the Entrepreneur. Burr Ridge, IL: Irwin.

Comment: TIMMONS, J.A., SMOLLEN, L. E. AND DINGEE, A.L.M. (1990). New Venture Creation: Entrepreneurship in the 90's. 3rd. Edn. Homewood, IL: Irwin.

Comment: CLAY, N. & CREIGH-TYLE, S. 1994. SMEs and training: evidence from the European Union. Scotland: Stifling: Internationalising Enterprise Education and Training.

Comment: CLAESSENS, D. 1982. Bedrijfsbeheer in KMO en management in grote ondernemingen. Een vergelijkend theoretisch onderzoek. Leuven: Katholieke Universiteit, Centrum voor Economische Studien. 195p.

18

better chance of survival in a fast-changing environment and therefore create a stable

environment. Whereas Visagie (1996:35) argues that SMEs are important contributors to

the community in the form of social services, education and provision of employment.

Additionally, Thomas (1995:13) states that SMEs have the potential to stimulate

entrepreneurship, activate competition in the economy, and are supportive in adapting to

the challenges of even greater international competition.

These advantages are recognised by the South African Government, which has often

voiced that the small business sector is seen as an important force for generating

employment. This is supported by a document produced by the National Treasury (2002)

reviewing the economic importance of SMEs. Relevant extracts of this review are

presented in Appendix VI. The SME sector is important for more equitable income

distribution, for activating competition, exploiting niche markets (both domestically and

internationally), enhancing productivity and technical change, and through all of this,

stimulating economic development (White Paper of the Department of Trade and Industry,

1995:10). However, the national and international environments are characterised by fast

changes that offer unique challenges and threats to SMEs. One way of ensuring that SMEs

in South Africa not only survive in such an environment, but also contribute to the

country's economic growth and development, as set out in the White Paper, is by

stimulating creativity in this sector.

Comment: VISAGIE, J.C. 1996. SMMEs social responsibility in a changing South Africa - beginning of a new era? Southern African Journal for Entrepreneurship and Small Business, 8 (1): 35-47.

Comment: THOMAS, W. 1995. The SMME White Paper - beginning of a new era? Southern African Journal for Entrepreneurship and Small Business, 7 (1): 12-28.

Comment: National strategy for the development and promotion of small business in South Africa. 1995. White Paper of the Department of Trade and Industry, February, 58p

19

2.4.1 DEFINING CREATIVITY

Maas and de Coning (1999) focus on two complex study-fields. One of these is

creativity, the other SMEs, within the South African context.. They suggest that

creativity is the accomplishment of new, useful developments because of the

interaction between an individual and his/her environment.

The accomplishment, within context, refers to the different processes that can be

used. These processes are:

• new to activities that can be regarded as new for a specific SME in the context

of South Africa

• useful to manifestations that add value to the activities of an SME

• individual to the creative individual; and,

• environmental to the internal and external environment within which the

individual continuously interacts.

2.5 UNDERSTANDING ‘THE MECHANICS’ OF SMES

2.5.1 INTRODUCTION

D'Amboise & Muldoney (1984:2) argue that there are three important interactive

perspectives that can help us to form a better understanding of SMEs. These three

perspectives are:

• The task environment,

Comment: MAAS, G. P. and DE CONING, T. J. (1999), Identifying indicators that play a meaningful role in promoting creativity in SMEs – A South African study. South African Journal of Business Management, Jun99, Vol. 30 Issue 2, p39, 9p, 3 charts, 1 diagram

Comment: D'AMBOISE, G. & MULDONEY, M. 1984. Specific theory for small firms: attempts and requirements. Paper delivered at Recontres de St-Gall, Zermatt, September.

20

• Organizational issues and

• Management characteristics.

This approach is supported by Welsh (1975:5) and Henry (1991:5). However, the

approach by D'Amboise & Muldoney (1984) addresses all issues relating to SMEs

and Maas and de Coning (1999) use the approach as a basis for further

investigation. However, the three interactive perspectives are considered important

and are discussed below.

2.5.2 THE ENVIRONMENT

According to Coetzee, Havenga & Visagie (1993:1), no SME can act in isolation

and therefore needs to interact dynamically with its environment. This is supported

by Sexton & Van Anken (1985:8), who state that an SME which reacts dynamically

to environmental changes will show better results. In order to react dynamically to

environmental changes, SME owners need information. In this regard, Evans &

Russel (1990:3), support this and indicate that the rate of change will probably

accelerate due to the availability of reliable information. In addition, Hartman,

Tower & Sebora (1994:37) indicate that SME owners get information from a wide

variety of sources. The most frequently used sources are the person himself, family

members and sales representatives. Some very important support mechanisms for

SME owners are their network systems. These enable the SME owners to generate

reliable and timely information (Johannison, 1992:102 and Longenecker, Moore &

Petty, 1994:432). These networks will, however, be different for different situations

according to Churchill & Lewis (1983:34) For instance in a survival phase an SME

Comment: WELSH, G.S. 1975. Creativity and intelligence: a personality approach. University of North Carolina at Chapel Hill: Institute for Research in Social Science, 295p.

Comment: HENRY, J. 1991. Creative management. London: Sage Publications, 323p.



Comment: COETZEE, J.E., HAVENGA, J.J.D. & VISAGIE, J.C. 1993. The influence of some important environmental factors on SMEs, Southern African Journal for Entrepreneurship and Small Business, 5(1): 1-11.

Comment: SEXTON, D.L. & VAN AUKEN, P. 1985. A longitudinal study of small business strategic planning, Journal of Small Business Management, 23 (1): 13-15.

Comment: EVANS, J.R. & RUSSEL, P. 1990. The creative manager. London: Unwin Paperbacks, 215p.

Comment: HARTMAN, E.A., TOWER, C.B. & SEBONA, T.C. 1994. Information sources and their relationship to organizational innovation in small business, Journal of Small Business Management, 32 (1): 36-47.

Comment: JOHANNISSON, B. 1992. Entrepreneurs as learners- beyond education and training. Paper delivered at Internationalizing Entrepreneurship Education and Training 1992, Dortmund, June

Comment: LONGENECKER, J.G., MOORE, C.W. & PETTY, S.W. 1994. Small business management: an entrepreneurial emphasis. Ohio: South Western Publishing Co, 825p.

Comment: CHURCHILL, N.C. & LEWIS, V.L. 1983. The five stages of small business growth, Harvard Business Review, May-June: 30-50.

... [1]

21

owner will probably focus more on questions such as cash generation and break-

even points and will therefore need people who can help him with that.

2.5.3 ORGANIZATIONAL ISSUES

In their study, Maas and de Coning (1999) review the organizational behaviour of

SMEs. Organizational behaviour focuses primarily on structures and processes in

SMEs. Whereas Morris (1993:2) draws a distinction between entrepreneurial and

small business organizations. He argues that the entrepreneurial organization is

more creative than the small business organization due to the futuristic and

opportunity-driven approaches of the former. However, the focus remains on how

SMEs are organized to achieve their goals in a dynamic environment. In this

regard, Sheitogan & Cote (in D'Amboise & Muldoney, 1984:30) argue that

structures must be flexible and that they will change according to environmental

changes. Interestingly, Churchill & Lewis, (1983:50), support this view and add

that the phase of development will also have a critical impact on structures. For

instance a newly established SME will be structured differently from a growing

SME. Scholhammer & Kuriloff (1979:180) take a different perspective and regard

structures in SMEs as being different from those of large organizations. Thus one

can not regard an SME as a small large organization. Nevertheless, an SME does

have some identity, and it is often attributed to the characteristics of its founding

owner.


Comment: MORRIS, M. 1993. Environmental change, entrepreneurship and competitive change: implications for large and small South African firms, Business Alert, 143: 1-16.


Comment: CHURCHILL, N.C. & LEWIS, V.L. 1983. The five stages of small business growth, Harvard Business Review, May-June: 30-50.

Comment: SCHOLHAMMER, H. & KURILOFF, A.H. 1979. Entrepreneurship and small business management. New York: John Wiley and Sons, 608p.

22

2.5.4 MANAGEMENT CHARACTERISTICS: “THE ENTREPRENEUR”

Carland, Hay & Carland (in D'Amboise & Muldoney, 1984:11) draw the following

distinction between entrepreneurs and small business owners:

• An entrepreneur is an individual who establishes and manages a business

for the principal purpose of profit and growth. The entrepreneur is

characterised mainly by innovative behaviour and will employ strategic

management practices in the business. However, a small business owner is

an individual who establishes and manages a business for the principal

purpose of furthering personal goals. The business must be the primary

source of income and will consume the majority of the owner's time and

resources. This is where owner perceives the business as an extension of his

or her personality, intricately bound with family needs and desires.

Thus entrepreneurial SME owners will be more inclined towards creativity.

Accordingly, Pleitner (1984:4) and Smith & Miner (1983:326) support this view.

However, Pleitner (1984:4) also states, somewhat surprisingly, that the majority of

owner-managers tend not to be entrepreneurs.

Various authors have carried out research on the typical characteristics of an

entrepreneur, such as Bhide (1994:160), Amit, Glosten & Muller (1993:817), Banfe

(1991:7) and Andren & Uudelepp (1993:221). The list of characteristics includes

inter-alia: creativity, technical expertise, perseverance and internal locus of control.

De Coning (1988:56), however, focused on the South African environment and


Comment: PLEITNER, H.J. 1984. The entrepreneur - centre of the management in small and medium-sized firms. Paper delivered at Recontres de St-Gall, Zermat, September.

Comment: SMITH, N.R. & MINER, J.B. 1983. Type of entrepreneur, type of firm, and managerial motivation: implications for organizational life cycle theory, Strategic Management Journal, 4: 325-340.

Comment: PLEITNER, H.J. 1984. The entrepreneur - centre of the management in small and medium-sized firms. Paper delivered at Recontres de St-Gall, Zermat, September.

Comment: BHIDE, A. 1994. How entrepreneurs craft, Harvard Business Review, March-April: 150-161.

Comment: AMIT, R., GLOSTEN, L. & MULLER, E. 1993. Challenges to theory development in entrepreneurship research, Journal of Management Studies, 30 (5): 815-834.

Comment: BANFE, C. 1991. Entrepreneur - from zero to hero. New York: Van Nostrand Reinhold, 206p.

Comment: ANDREN, L. & UUDELEPP, U. 1993. Search for an entrepreneurial education. Paper delivered: Internationalizing Entrepreneurship Education and Training 1993, Vienna, July 5-7.

Comment: DE CONING, T.J. 1988. 'n Ondersoek na die moontlikheid en aanwendbaarheid van ondernemingskenmerkgebaseerde kategorisering van kleinsakelui in Weskaapland. Ongepubliseerde Ph Dproefskrif. Bellville: Universiteit van Stellenbosch, 283p.

23

identified the following characteristics of an entrepreneur that support the work of

above the researchers. These are:

• He/she is a calculated risk taker

• He/she possesses internal locus of control

• He/she has a holistic approach, knowledge and experience regarding

technical and management skills

• He/she possesses a value system and motivation, which focuses on growth

and development through the creative exploitation of opportunities.

Additionally, these characteristics also support the characteristics of a creative

person.

2.5.5 CONCLUSION ACCORDING TO MAAS AND DE CONING (1999)

It is interesting that the findings made by Maas and de Coning (1999) supplied

three major contributions towards the study field of SMEs. These are:

1. It focuses on the role of creativity in SMEs. Where the role of creativity

is argued from a business economics perspective because it is assumed

that creativity has no meaning for SMEs unless it contributes towards

the growth and development of an SME.

2. Their study identifies various indicators that can play a meaningful role

in the promotion of creativity in SMEs. It can also help focus attention

on planned interventions that do have a probability of improving the

creative potential of SMEs. Since the indicators identify skills as well as


24

behaviour, a balanced approach in the promotion of creativity can be

achieved. It assumes that if the creative potential of SMEs can be

enhanced, this will eventually lead to a better support of national goals

in South Africa.

3. Their study contributed to the debate in South Africa as to whether

SMEs locally can actually contribute to the growth and development of

the economy. If it is accepted that creativity is a very important aspect

of entrepreneurship and that entrepreneurship in turn is a very important

aspect in stimulating the growth and development of an economy, then

some answers can be found by comparing the indicators with actual data

(descriptive statistics). Although the way deficiencies between

indicators and descriptive statistics are determined can be regarded as

subjective, it still provides a very important overview of where

deficiencies exist. However, it is very important to note that most of the

deficiencies exist in the characteristics of SME owners, and not those of

the enterprise. This is significant, especially when it is compared with

descriptive statistics where 41.23% of their respondents indicate that

there was no creativity in their business.

The above leads to the conclusion by Maas and de Coning (1999), namely that if

the SME owner is not inclined towards creativity, the probability of creative

manifestations will be negatively influenced despite structures and processes that

actually enhance creativity. This is supported by Donckels (1992:28), Rothwell &

Zegveld (1982:45) and Giaoutzi, Nijkamp & Storey (1988:74), who all agree that


Comment: DONCKELS, R. 1992. Webben weven over KMO-ers en hun omgeving. Brussel: Roularta Books, 128p.

Comment: ROTHWELL, R. & ZEGVELD, W. 1982. Innovation and the small and medium sized firm - their role in employment and in economic change. London: Franes Primer, 268p.

Comment: GIAOUTZI, M., NIJKAMP, P. & STOREY, D.J. 1988. Small and medium-size enterprises and regional development. Chippenham, Wiltshire, Great Britain: Anthony Powe Ltd, 314p.

25

the SME owner is the central controlling factor in the creativity process in small

and medium enterprises. The Employment Equity Act can adversely affect the

natural processes of SMEs by not taking into account the ability of creativity that is

important in the sustained successful growth of all businesses.

Maas and de Coning (1999) summarise that it can be deduced from the above

arguments that creativity is not that common in the South African SMEs, and that a

major contributing factor is the existing profile of SME owners. However,

creativity cannot be stimulated overnight and by means of recipes and legislation.

Unfortunately there are no statistics available to evaluate the growth potential of

SMEs in South Africa (National Treasury, 2002:49) but the indicators clearly

outline that skill and behavioural issues are important for the South African

economy and SME growth. Therefore the stimulation of creativity cannot only be

done by means of training programmes. An external environment that supports and

stimulates creativity must also be created and maintained.

2.6 THE ROAD TO THE EEA - AFFIRMATIVE ACTION LAID THE

FOUNDATIONS

The Economist (1995) provides comment and quotations regarding affirmative action in

South Africa. It quotes the then first deputy president’s brother, Moeletsi Mbeki, an exile-

turned entrepreneur as saying:


Comment: Economist, The darkening of white South Africa. 20/05/95, vol 335 Issue 7915, South Africa, p18,3p, 2 graphs, 1 cartoon.

26

“Affirmative action only benefits a small class of already privileged people… I

think more and more people won’t take affirmative-action jobs because they’ll be

seen as people who can’t quite make the grade on their own.”

If that statement can apply to the present EEA, questions arise as to whether large

businesses would be left short of their staff compliment, and whether those people would

be more likely to be involved at the small and medium enterprise level. Lending

institutions and financial backers could now be more adept at assisting previously

disadvantaged groups, who now have suitable qualifications and experience, to start their

own businesses. In the meantime, large business could be at a shortfall to meet the plans as

laid out by the EEA.

The Economist (1995) continues by adding that it would not be long before a White takes

the first case to South Africa’s constitutional court to uphold the right to protection from

racial discrimination. Continuing with the comment that if and when that happens, it will

be the first test of a somewhat ambiguous sub-clause in the constitution [later adopted

within the EEA] which says such protection does not preclude ‘measures designed to

achieve adequate protection and advancement of persons or groups or categories of persons

disadvantaged by unfair discrimination.’

The Economist (1995) makes a statement at the time before the introduction of the EEA.

And, although present day issues (2002) occurring in Zimbabwe come to mind, the

following extract may bode not so well for SMEs in the future who could rely on larger

organizations and government bodies for future growth:



27

“Sooner or later, the government will need to decide whether to introduce laws that require

firms or institutions to practice affirmative action [EEA]. The tempers that have flared over

the issue in America may give South Africans something to think about. There is no

question that South Africa needs to make up for the malevolence of apartheid; through

education, through spotting and grooming talent. The danger lies in equating that potential

with a particular group of people, which can breed tokenism and resentment. Politicians

often use affirmative action as a mask for stuffing institutions with their cronies, or for

dishing out state contracts to their friends. Already the first three new appointments to be

made within the revamped SABC were people closely linked to the ANC. And once

statutory affirmative action [EEA] is in place, it is hard to undo.” – Source: The Economist

20/05/1995

South Africans are perhaps notably apathetic, and unlike the American scenario, they are

more likely to accept the status quo and quietly emigrate hoping for better pastures. Further

research could investigate to what extent both White and Black South African (business)

people are leaving the country and whether this relates to the EEA as it affects SMEs.

However, this study does provide an insight regarding this factor. This is covered later in

Section 2.8, referring to the research carried out by the The Southern African Migration

Project. The findings are important in providing supporting evidence that the South

African environment has brought about circumstances where the loss of its skilled people

to other countries is highly probable.

2.6.1 THE RELEVANCE OF THE EEA TO ECONOMIC GROWTH

In her study of Organization Theory, Ziehl (2000) relates to the EEA and how the

Bill (Government Gazette, 1996) leading up to the Act devoted only 30 lines to the

question of economic growth while about 150 lines were taken up by a description

Comment: ZIEHL, S. (2000). Affirmative action and equal opportunity policies – the relevance of a dead german. Society in Transition, 2000, Vol. 31 Issue 1, p58, 11p,1 chart.

28

of the legacy of apartheid and the constitution. She makes a point that less than

10% of the preamble in the final Act is devoted to economic development and

efficiency in the workplace with the remainder devoted to issues of equity,

discrimination etc.

In Table 1 of her study, Ziehl (2000) adds further issue to the lack of economic

importance of the EEA by making a point of comments made by the South African

Chamber of Business’s (SACOB) representative. These were:

“It will erode investor confidence, particularly if foreign companies found

their ability to transfer highly skilled personnel to South Africa was

severely restricted…

“we sincerely believe the Bill [later as the EEA] will undermine

productivity, efficiency and morale and strengthen the reluctance of

companies to employ precisely in those sectors that afford the greatest

opportunities of creating jobs…

“Punitive measures in the Bill [later as the EEA] are deeply worrying… the

proposed levels of fines virtually equates a transgression in employment

practice with major criminal activity…

“Some provisions are vague and will lead to disputes. The Bill [later as the

EEA] gives ample scope to just about any action… to be judged

unacceptable by a government official…

“The penalties…should focus on non-administrative aspects of the Bill’s

[EEA’s] provisions such as corporate culture change interventions and


29

feedback from Black managers, women and the disabled on their progress

in the company, affirmative action should be defined as a means of

changing culture, policies and practices of business.”

Still referring to her notes in Table 1, Ziehl (2000) points out that there is only one

reference to the possible economic consequences of affirmative action. This is

illustrated by the Black Management Forum’s statement which implies that ‘by

reducing alienation amongst Blacks, efficiency and productivity will be improved.’

2.6.2 INTERPRETIVE DIFFERENCES REGARDING AFFIRMATIVE ACTION

The literature review seeks to contribute a meaningful amount of background

information regarding affirmative action. The objective is to ascertain the attitudes

and perspectives held by the South African populace on the subject. The trend

could quite possibly be regarded as synonymous to the attitudes held by business

people and their SMEs.

Apparently, affirmative action is not synonymous with a policy of equal

opportunity, seeing that the latter does not rectify imbalances in terms of

employment, training and personal development (Ziehl, 2000). The

institutionalisation of affirmative action is an intervention, which aims at abolishing

inequalities, and therefore involves more than the mere provision of equal and

merit-based opportunities (Fischer, 1995:23; Human, 1993:5; Rossouw, 1994:73).

In reality, policies advocating equality in employment, training and promotion

opportunities are efforts at avoiding discrimination by evaluating prospective as


Comment: ZIEHL, S. (2000). Affirmative action and equal opportunity policies – the relevance of a dead German. Society in Transition, 2000, Vol. 31 Issue 1, p58, 11p, 1 chart.

Comment: FISCHER, S. 1995. Placing women on the affirmative action agenda. People Dynamics, 12(12):8-13.

Comment: HUMAN, L. 1993 Affirmative action and the development of people, a practical guide. Kenwyn: Juta.

Comment: ROSSOUW, D. (1994). Business ethics, a Southern African perspective. Pretoria: Sigma.

30

well as existing employees against universal achievement-relevant criteria (Ziehl,

2000). Therefore, such evaluations prohibit the use of ascribed status, such as race

and gender, while affirmative action in fact emphasises such attributes. This

ambiguous situation is compounded further whereby a policy of equal opportunity

negates the history and context of discrimination, while affirmative action finds its

reasons for existence in it (Gawanas, 1992:64; Wingrove, 1993:11). Crosby and

Clayton (1990:64) bring further emphasis to this paradox by stating:

‘Equal opportunity assumes an ideal world, wherein saying that sex and

race do not matter makes it true. The proponents of affirmative action argue

that to be gender and race neutral, in a world that has historically been

neither, one cannot be gender or race blind.’

The policies of Equal Opportunity [within the EEA] envisage a situation where

equal opportunities prevail once affirmative action has been successfully

institutionalised. In Ziehl’s study (Ziehl, 2000) she says that just more than half

(51%) of the respondents indicated a difference between the concepts of affirmative

action and equal opportunities. She continues that White employees (68%) indicate

awareness of this difference, while 58% of the Black respondents did not indicate a

distinction between the two concepts.

The term reverse discrimination often has the same negative connotation as the

concepts discrimination and first-order discrimination. Since Black people have

been disadvantaged by first-order discrimination because of race, reverse

discrimination can imply the same for White people. Ziehl (2000) discovers that


Comment: GAWANAS, B. (1992). Affirmative action to the disadvantaged populations: public employment in Namibia. (In Affirmative action in a new South Africa. The apartheid legacy and comparative international experiences and mechanisms of enforcement: based on a conference conversed by the Constitutional Committee of the ANC in October 1991.Cape Town: The Centre for Development Studies, University of the Western Cape. Pp62-67.)

Comment: WINGROVE, T. (1993). Affirmative action: A ‘how-to’ guide for managers. Pretoria: Sigma.

Comment: CROSBY, F & CLAYTON, S. (1990). Affirmative action and the issue of expectancies. Journal of Social Issues,46(2);61-79.



31

almost 70% of the White employees within local authorities in the Free State feel

that affirmative action is nothing other than reverse discrimination. Black

employees who hold the same opinion of affirmative action are in the minority. In

addition, her study reveals that most White male employees (84%), especially those

at the middle management level, regard their career opportunities within their

particular local authority in a negative light. On the other hand, in respect of

employment, the majority of Black respondents (66%) indicate that Black people

do not have a better chance of employment than White people, while 92% of the

White employees feel that Blacks have a better chance.

In referring to the prescribed affirmative action measures within Section 2b of

Chapter 1 of the EEA (Appendix Ia), Ziehl (2000) states that since affirmative

action is a means to an end, it is supposed to be temporary in nature. By indefinitely

giving preference to people from disadvantaged groups the achievement of the

ideal of equal employment opportunities are simply not feasible. A paradox

develops where Krafchik (1992:19) points out that affirmative action is very

seldom temporary in nature and the sustained application of it is hardly avoidable.

He ascribes this situation largely to the pressure exerted by interest groups, such as

trade unions, on governments to continue with affirmative action, with concomitant

racial tensions and conflict. Krauthammer (1990:56) shares this viewpoint:

“… the idea that affirmative action is just a temporary remedy is a fraud.

With every new civil rights act … ethnic quotas and race consciousness

become more deeply woven…”


Comment: KRAFCHIK, W. (1992). Pressure is on for affirmative action. Democracy in Action, 15(6):16-21.

Comment: KRAUTHAMMER, C. (1990). Reparations for Black Americans. Time, 56, Dec.11.

32

There is no doubt that if the growth rate of the South African population and the

increasing pressure which it places on economic activities are taken into account,

there is simply not enough white people to meet the need for highly trained

personnel (Charlton, 1994:14; Herbert, 1994:30; Makhanya, 1995:166; Meintjies,

1993:42). It can therefore be understood that the objectives of the EEA are

designed to expand and develop the wide base of skills essential for accelerated

economic growth. This sentence bears a reference of great importance. Skills are

the ‘life blood’ for economic growth, South Africa cannot afford to lose what skills

it already has. In fact there should be no condescension towards existing skills

achieved by White males under the apartheid era. These skills can be used to great

benefit in expanding employment equity by co-operation and working together.

2.7 VIEWS ON THE CONSEQUENCES OF THE EEA

It therefore follows that the quandary that South Africa finds itself in is that it has

insufficient human resources in quantity that have sufficient knowledge, experience, skills

and qualifications to fulfil the objectives of the EEA. This has to be achieved over a long

period as the EEA has prescribed within The Department of Labour’s Employment Equity

Plan (2000b) and later discussed in a report by the Department of Labour (2000c).

Maphai (1989) explains that the South African economy has never had sufficient Whites to

occupy key positions and foreign Whites had to be recruited to occupy positions from

which Blacks were barred. Therefore, affirmative action programmes would not be

jeopardising White positions in any way, but rather filling an economic gap. As to whether

Comment: CHARLTON, G. D. (1994). Affirming action – beyond 1994.kenwyn: Juta.

Comment: HERBET, T. (1994). Affirmative action in the South African workplace: “Allowing Black Eagles to Soar.” Cape Town: Salty print.

Comment: MAKHANYA, M.(1995). An overview of affirmative action in South Africa. In A. van der Merwe (Ed.), Industrial Sociology; A South African Perspective, (pp 157-176). Johannesburg: lexicon.

Comment: MEINTJIES, F. (1993). Confronting discrimination in organizations. The Innes Labour Brief, 4(3): 41-51.

Comment: Department of Labour, (2000). The Employment Equity Act: User Guide – Section 2. http://www.labour.gov.za/docs/legislation/eea/guide-sec02.html

Comment: MAPHAI, V. T. (1989). Affirmative action in South Africa: A Genuine Option. Social dynamics 15, pp. 1-24.

33

this statement is true today is a debatable point, but the fact is that many Blacks now hold

key management positions previously held by white males. But the question arises, where

are these White males now? Again, the answer may well lie in the review regarding

emigration in Section 2.8., for there seems no benefit for them to go into business on their

own.

A further question arises for research. It will need to determine whether these new Black

managers will actively adopt an affirmative action bias or consider equal opportunity

principles based on merit. White-owned SMEs may well show concern about the presence

of Black decision-makers now in previously White held positions. No doubt they are

seriously contemplating how that will affect their business.

2.7.1 REVIEWING THE INTERPRETATION AND SOME OF THE EFFECTS OF

THE EEA

From the findings so far within the literature review, co-operation and inclusion of

the previously advantaged group would seem the ideal. Yet this previously

advantaged group of White males, both employed and self-employed, feel they are

placed in a position of social disadvantage and mental demotivation. However they

do not seem to be alone on this matter.

Interestingly a study carried out by Adam (2000) reveals that there is a growing

fear, especially among Coloured professionals that business is directing affirmative

action and “fast-track promotion” programmes solely at Black Africans – at the

Comment: ADAM, K. (2000). Affirmative Action and popular Perceptions: The Case of South Africa. Society, Jan/Feb 2000, Vol. 37 Issue 2, p48, 4p.

34

expense of Coloured and Indian employees. Within some companies, the general

perception prevails that if one promotes a Black African man, or even better a

Black African woman, ‘you are really seen’ to have achieved something. Indian

and Coloured appointees, although technically part of the disadvantaged target

groups, would be seen as second choices in the absence of suitable ‘real’ Black

candidates. The topic is not unprecedented and has been addressed in previous

research.

Research by Adam (2000) notes from the answers in her study that there is

potential for racial competition becoming obvious. Non-racialism as the core-

ideology of the new state contradicts itself by the differential treatment of the past

victims of racialism. Consequently, racial affirmative policies as a form of state-

sponsored social mobility have emerged as one of the most controversial and

divisive issues in post-apartheid South Africa. Singled out for preferential treatment

in job allocation and government contracts are members of “formerly

disadvantaged groups.” This official euphemism for discredited racial

classifications applies in theory to the Black African, Coloured and Indian sections

of the population. However in practice it is often interpreted as bestowing

advantage on Black Africans as the previously most discriminated against and now

politically dominant group of the three disenfranchised apartheid victims. Hence,

new rivalries are triggered amongst the middle groups, Indians and Coloureds,

some of whom again feel excluded from equal opportunities.

Comment: ADAM, K. (2000). Affirmative Action and popular Perceptions: The Case of South Africa. Society, Jan/Feb 2000, Vol. 37 Issue 2, p48, 4p.

35

Again, the EEA needs to place emphasis on the inclusion, to the letter, of suitably

skilled groups in order to achieve its objectives. Notwithstanding the fact that

Coloureds and Indians are surreptitiously placed second in line to Black Africans.

Taking account of these factors, SMEs that are not only owned by Whites, but also

those that are owned by Coloureds and Indians, show some concern over the

implications of the EEA on their businesses. Their skills and experience are a

valuable asset to the economy of the country.

2.7.2 THE RELEVANCE OF THE EEA ON BUSINESS

South Africa’s Employment Equity Act is discussed by The Economist (1999). It

provides comment where in the past South African firms objected to many aspects

of apartheid because they affected profits. Job reservation for Whites forced

companies to overpay their White staff, denied them the benefit of Black skills and

led to volcanic relations with Black Unions. As apartheid laws crumbled, market

forces led to an improvement in Black wages and jobs, well before the ANC came

to power. Between 1975 and 1990, says the Economist (1999), average Black

earnings in manufacturing increased by almost 50%, according to the South African

Institute of Race Relations. In contrast there was only a 1% increase awarded for

Whites. Nevertheless, the government still believed that Black advancement was

being blocked by racist White bosses and that the solution would be tougher laws.

The case for this, The Economist (1999) continues, rests on the assumption that

White businessmen will never treat Blacks fairly without coercion.

Comment: The Economist (1999). Race, law and poverty in the new South Africa. 10/02/99, Vol. 353 Issue 8139,p45, p2, 2bw.


36

~ This, ironically, is affirmed in a statement made by Rams Ramashia (2002) in the

Business Report newspaper and reported:

“The Department of Labour would come down heavily on companies that

failed to implement the Employment Equity Act and the Skills

Development Act.”

This was announced at the conference of the Black Management Forum in Midrand

South Africa on 11th October 2002. Ramashia, the Department’s Director-General

continued saying:

“That when faced with companies that drag their feet on this issue, we will

not hesitate to act. We will fine them to bankruptcy. We are at a stage when

we focus on substantive compliance with the Acts. Despite the fact that

many companies had submitted their skills and development plans, there

were those still opposing the Acts. To expect that these Acts will not be

opposed by those who benefited from apartheid is to be naïve.” ~

The introduction of the EEA, continues The Economist (1999), will probably be

accommodated by large firms albeit at a cost in time and efficiency. Many small

firms, already struggling with high interest rates, a skills shortage, crime and a

stagnant economy may go bankrupt. At the least, the law will aggravate an already

marked reluctance among businessmen to hire new staff. At a time when, by one

estimate, only one new entrant to the labour market in 30 finds formal employment,

this would do the poor [and really disadvantaged] no favours.

Comment: RamsRamashia (2002) Implement Job Equity or face the state’s wrath. The Business Report 13.10.2002 Page 1. International News and Media Johannesburg Report by Mokgadi Pela.


37

But it is not all criticism, support can be found in an article written by Guiilebeau

(1999). He observes that the country that has been most successful in its affirmative

action programmes is South Africa. He adds:

“That this is true regardless of what definition of success is applied, …

Much to the discomfort of Whites, Black workers are rapidly replacing

them and moving toward a society where wealth is distributed more

equally…

“and I prefer to remain an optimist for South Africa. The true challenge for

the country may not be in achieving public support for its policy, but

knowing when to slow affirmative action programmes as industry and

academia become more racially balanced.”

Guiilebeau (1999) makes a valid point here, which would be of much interest to the

owners of SMEs. That interest no doubt runs to defining what constitutes ‘more

racially balanced’ so that it can be accepted and accommodated for, if it

demonstrates true employment equity.

Guiilebeau (1999) may consider South Africa as being most successful in its

affirmative action programmes, but it cannot be forgotten that India also has had its

fair share of dealing with equality. Nair (2002), by strange coincidence,

unconsciously describes the Indian experience of equality under the, then new,

constitution of India with similar parallels in South Africa:

The scheme of equality, thus provided in the Constitution [India] presents a

‘classic compromise’ between seemingly opposed and competing policies

of equality and preferential treatment. The tension arising out of the above

Comment: GUIILEBEAU, C. (1999). Affirmative action in a global perspective: The Cases of South Africa and Brazil. Sociological Spectrum, Oct-Dec 1999, Vol. 19 Issue 4, p443, 23p, 2 charts.



38

juxtaposition of two competing commitments was truly reflected by Prime

Minister Jawaharlal Nehru when he said, “we arrive at a peculiar tangle. We

cannot have equality because in trying to attain equality we come up against

some principles of equality.”

The parallel comes to mind where the ambiguity of the EEA refers to

discrimination not being permissible on the one hand but being permissible when

affirmative action measures are instituted. Nevertheless India has progressed well

with its transformation process, notwithstanding the aid of the judiciary that has

been active in resolving conflict and providing meaningful amendments and

recommendations.

2.8 SOUTH AFRICAN SKILLS MIGRATION

2.8.1 INTRODUCTION

The migration of skilled people from South Africa to other countries is nothing

new. In fact it has become an international trend that all countries are now

experiencing because of better communications and transport worldwide. What

makes South Africa a point of interest is that the government of South Africa has

protectionist immigration policies in effect. These make it very difficult for skilled

foreigners to enter the country and work here on a permanent basis. Consequently

the emigration of South Africa’s skilled people is not made good by skilled

immigrants. The results found within this dissertation are aimed to achieve support

for its objectives from the findings of the Southern African Migration Project 2000,

Series 18.

39

The Southern African Migration Project 2000, Series 18, (SAMP), provides an in

depth research into South Africa’s skills migration. Extracts from SAMP, edited by

Jonathan Crush (2000), are referred to in Appendix IV. The work is included within

this literature review as it provides an important insight as to why South Africa’s

skilled people have the desire to leave. The effect of the EEA on White SMEs can

be interpreted as compounding the reasons for their departure. This is highlighted

by a new issue that may motivate White SMEs to emigrate extracted from the

SAMP findings in Appendix IV, Section: IV.10:

• Skilled South Africans were asked about their satisfaction with a wide

variety of measures of “quality life.” There are high levels of dissatisfaction

with (a) the cost of living, (b) levels of taxation, (c) safety and security, and

(d) the standard of public and commercial services. With the exception of

standard of services, dissatisfaction extends across racial boundaries and is

not a predominantly White pre-occupation. They are far less dissatisfied

with personal economic conditions as well as with schools and available

health care. The single exception is Black dissatisfaction with current

income levels.

~ It can be noted here that income levels may now be affected because of the EEA

depriving a good income from jobs previously held by Whites or Whites which are

now unemployed because of the EEA. ~

40

These skilled people can take with them the potential in contributing to South

Africa’s economic growth. And it is this topic that is contained within the focus of

the hypothesis. Therefore the contribution by Crush (2000) can be used as

supporting evidence to the hypothesis.

2.8.2 WHO NEEDS SKILLED PEOPLE?

Crush, McDonald and Williams (2000:1) state that between 1989 and 1997,

233,000 South Africans left the country. They add that this has not been made up

by immigration where in 1993, South Africa let in 9,800 immigrants. Subsequently

these figures were more than halved by 1997, to only 4,100. Interestingly they say

that their survey of South African emigration intentions reported in Chapter 1 of the

publication suggest that the ‘brain drain’ is unlikely to slow over the next decade,

and that Black South Africans are as likely to leave as White South Africans.

The survey continues by adding that this represents a potentially significant drain

on human capital. However, South Africans are not the only ones considered to

have the desire to emigrate. Existing foreign nationals resident in South Africa are

quoted by Crush et al. (2000:3) as being innovative and hard-working immigrants

who add massive value to the new economy and society. Their net impact is hugely

positive for national economic development and the citizenry. The EEA also

impacts on these immigrants negatively as they are no longer afforded preferential

status for work that they enjoyed previously as ‘advantaged people’. If White

SMEs can be regarded as integral with the responses found in the SAMP survey,

then the EEA has added impetus to the desire for Whites and their skills to leave

41

the country. The loss of benefits within their lifestyle, which they are now no

longer afforded under the EEA, being the motivator. The SAMP survey finds how

attitudes to lifestyles and politics held by skilled South Africans are portrayed in

Appendix IV, Sections: IV.11 and IV.12 respectively. The White SMEs may well

hold similar proportionate views instilled by the application of the Employment

Equity Act.

South Africa needs skilled people by retaining the skills of those potential

emigrants and utilising their skills and experience for the benefit of the country’s

economy and growth. This can be used in the transference of skills to those who

were disadvantaged previously. As previously mentioned, the EEA by its

implementation, does little to encourage the import of skills development from

foreign nationals. Hence South Africa can no longer benefit economically by

‘importing’ skills and experience that the rest of the world may offer.

Surprisingly in the review conducted by the South African National Treasury

(2002:32), it reports:

A related aspect of the human-resource framework is the ease with which

immigration legislation enhances or undermines the domestic skills base of the

business environment. The accessibility of relevant skills at a reasonable price is

more often than not the critical factor in the success of small businesses,

particularly in their expansion phase. Furthermore, it is widely acknowledged that

emigration is largely unstoppable. Therefore, the only remedial action is to ensure

42

that the immigration policy compensates, at least partially, for the loss of skills and

expertise due to emigration.

The issue of the South African skills loss, often referred to as the ‘Brain Drain’ has

become a highlighted topic for discussion. This is illustrated in Appendix V and

provides extracts from the most recent SAMP reports which demonstrate general

concern about the country’s loss of skilled people. Consequently the South African

government and other political parties may well be motivated to analyse the

situation in depth and formulate actions to protect the economy. Information with

regard to the remainder of the study by SAMP is found in Appendix IV.

In the following chapter, the literature review is complemented by presentation of the

methodology in which primary data is gathered.

43

CHAPTER 3

METHODOLOGY

3.1 INTRODUCTION

The previous chapter provides a valuable source of secondary information. The need to

gain further information is carried out by research into primary sources. How this is

obtained is described in this chapter on methodology.

Given the benefits of gaining information from various sources, it was decided that a

multi-faceted approach, known as triangulation, would be best suited for the research as it

would check for bias, divergent opinions, consensus and similar attributes. It combines

both the quantitative and qualitative approach with an archival review. The quantitative

technique examines statistical data in the form of questionnaires. The qualitative technique

is carried out in the form of interviews. Both pertain to various affected quarters of

business and the environment.

Primary research includes an observational study of several small businesses and larger

organizations. An extensive literature review is carried out in terms of researching

secondary sources. The process of interviews, which assumes a semi-structured format,

supplements desk research. Interviews are carried out with people from within the business

and human resource sectors based in various parts of the country.

44

In using various research methods, the researcher is able to check for inconsistencies and

discrepancies. Input from all phases of the study continually reinforces what was learnt

previously, although occasionally, a new angle or approach is suggested. This leads to

conclusions that are more valid and present useable recommendations.

3.2 RESEARCH PARADIGMS

3.2.1 QUANTITATIVE RESEARCH METHODS

A quantitative process measures the subject numerically as the variables being

studied can be counted. By quantifying data, one is able to statistically evaluate it

(Babbie, 1989:366). The three quantitative levels of measurement are known as

nominal, interval and ratio, according to Bailey (1987:53).

A quantitative approach is complementary (Jankowicz, 1995:174). Proceeding from the

positivist assumption that if something exists, it exists in some degree, and can

therefore be numerically measured, it is characterised by:

• Involving you in concentrated attention on a limited number of variables and

constants which are important to you and which are usually expressed in the

language of your own investigation.

• A search for the significance of relative proportions, in order to identify what is

more important or significant and what is less so in the issue that you are exploring.

• An attempt to understand the ways in which selected factors in a situation are

structured or interrelated, in importance or precedence.

Comment: BABBIE, E. (1989), The Practice of Social Research, 5th. Edn., Belmont: Wadsworth.

Comment: BAILEY, K. D. (1987), Methods of Social Research, 3rd. Edn., New York: Free Press.

Comment: JANKOWICZ, A. D. (1995), Business Research Projects, 2nd . Edn., London: International Thomson Press.

45

• Abstraction from repeated single observations, in which the meaning or

significance of data arises from some aggregation, average, range, or comparison

rather than from the individual data points themselves.

3.2.2 QUALITATIVE RESEARCH METHODS

Qualitative data can be measured, by ascribing labels or names to things being

measured. Examples are political allegiance, religion and colour. These forms of

measurement are common in observational studies (Bailey, 1987:51). Qualitative

measurement is termed “nominal” as it is part of a classification system (Bailey,

1987:52). A qualitative approach has the following features according to Miles and

Huberman, (1994:6):

• It depends on a deep familiarisation with the normal or typical real-life

situation.

• It involves you in the search for significant themes running through disparate

sources.

• It results in a holistic understanding of the situation; of the factors involved and

how they interrelate, identifying the less obvious issues as well as those which

initially grab your attention.

• It demands that you take your informants seriously in their own language, and

from their own point of view, suspending your own personal and project related

preconceptions while you are gathering data, no matter how legitimate those

preconceptions might be.

Comment: MILES, M. B. AND HUBERMAN, A. M. (1994), Qualitative Data Analysis: an Expanded Sourcebook. London: Sage.

46

• It seeks to discover how people understand the situation or issue you are

investigating, and how that understanding guides their actions.

• It seeks to develop knowledge by linking the accounts people give to an

underlying body of theory.

3.2.3 TRIANGULATION

Triangulation occurs when a researcher conducts a study that is part qualitative and

part quantitative. Triangulation also applies if one employs more than one

technique, as in this study. It is useful to check for discrepancies as it allows for

comparison and to use the results from one method to cross check the results from

another.

3.2.4 DATA GATHERING

Several methods were employed to gather data and ensure that the scope and depth

of the study was adequate for research of this nature. Studying a number of

disciplines ensured a better grasp of understanding and provided recommendations,

as necessary, that are relevant to all SMEs.

3.2.4.1

Observational Studies

Observational studies being suited to qualitative research resulted in the study of a

number of KwaZulu-Natal businesses. A pilot observational study was carried out

47

and expanded. This was conducted by way of informal interviews with business

owners and managers of contracting companies and parastatals. Information was

noted over a period of three months and formed the foundations on how the

questionnaire and interviews were to be constructed. Questions were asked that

were relevant to how the EEA had an influence on their businesses.

3.2.4.2

Literature Review

The literature review is covered in Chapter 2. The extensive review covers

adaptation of SMEs to change, ambiguity, locus of control, defining creativity, the

environment, organizational and management issues and the loss of skilled people..

Articles from periodicals, specific to South Africa, supplement the literature

covering SMEs.

3.2.4.3

Telephonic Interviews

Twelve people skilled in human resource matters in other parts of the country were

contacted and their views sought during the pilot study. Most were interviewed

telephonically. General discussion of the topic with these people in the pilot study

gave rise to other contacts who would be able to provide further feedback. This was

valuable in determining whether the topic of the study would provide sufficient

response for a meaningful analysis. The aim of targeting this group was to confirm

that the trends uncovered exist in other parts of the country. The response

48

confirmed that the study would be worthwhile and generated a lot of interest to

review the results. A total of twenty-nine people were spoken to on the subject all

of whom declined from having their opinions and comments quoted by name. Their

contribution set the foundations for the qualitative analysis.

3.2.4.4

Face To Face Interviews

The interview process is essential to the study, as it would either confirm and add to

the observational process or, indicate that the observation process is flawed or

biased. Interviewees are carefully selected to ensure input from a wide spectrum of

disciplines. Interviewees include business owners, entrepreneurs, managers, and

directors of companies both large and small, and of both private and public sector

quarters. The numbers of interviewees are limited to seven. However they represent

businesses that contract or use the services of a substantial number of SMEs. In this

regard, it is considered that the interviewees’ businesses balance well with the

SMEs sampled for the quantitative part of the research.

The process was lengthy given the decision to conduct all work single-handed. The

benefit of this approach is that the risks of inconsistency, distortion and error are

substantially reduced as only one person gathered information and data and

analysed it. Conducting this fieldwork personally saved time and finance, by not

having to train and pay fieldworkers.

49

Interviewing is designed to check for bias, inconsistency and subjectivity. The fact

that the researcher did all the fieldwork makes it less likely that the recording and

assessment of data would be inconsistent. This process reduces the risk of

distortion, bias and error and allows for ease of explanation to the interviewee. This

reduces the risks of inconsistency and discrepancy in reporting. This allows greater

control of the interview when interviewee’s thoughts wander. Conducting the

interview personally intends to make interviewees realise that the researcher is

serious about the subject.

All interviewees quoted have given their consent. Questions posed are set to a standard

format as depicted in the interview schedule illustrated in Appendix III.

3.2.4.5

Questionnaire

The questionnaire is directed at SMEs and constitutes the focus of the study for

quantitative analysis. Primary contact is made with prospective SMEs in order to

obtain cooperation. The questionnaire is mailed by post to those who agree to

participate. Follow up calls by phone are made to request the questionnaires’ return.

Personal calls are made to procure the completed questionnaire from those that are

beyond the requested completion date. SMEs contracted or providing services and

supplies to large companies and/or organs of the State completed Questionnaire 1a.

One hundred and thirty-seven questionnaires were returned and completed

successfully. One hundred and fifty questionnaires were sent out. The sample size

was considered manageable, and adequate in providing meaningful and

50

representative findings. The sample covered a wide range of SME operations as

well as a varied integral sample of race groups. This was considered important in

gathering realistic and unbiased results. A sample of the questionnaire is found in

Appendix II. Profiles of these SME Groups are presented in Chapter 4, Section 4.2,

Table 4.0.

The sample covers all race groups and varied business interests. All businesses are sampled

from within the KwaZulu Natal Region at random. Business trends were investigated over

the period from 1996 to 2002, with specific questions placed within the questionnaire

covering such issues as turnover, business environment and personnel matters for example.

Any effects that could possibly be attributed to the EEA needed to be identified and

substantiated.

51

CHAPTER 4

FINDINGS OF THE STUDY

4.1 INTRODUCTION

In the previous chapter it was seen how the research process of the study utilised the

methods of qualitative and quantitative analysis. In this chapter the results of the completed

questionnaires, returned by the SMEs, are presented for examination in table form (Tables

4.0 through to 4.24) and provide for ease of reference. To aid reference and maintain focus,

the tables are shaded. The red areas depicted the key issues pertaining to the study. The

blue area presents the major reference result for ease of comparison with related tables.

The yellow areas provide information supplementary to the study and may be useful for

further study.

Results of the interviews are presented in Tables: 4.25 to 4.33. Full transcripts of the

interviews are in Appendix III.

4.2 PROFILES OF THE SME GROUPS

The following Table 4.0 illustrates the total number of SME Groups sampled. The sample

was drawn across cultural groups and various SME types in order to obtain the best

example for the study to be realistic and representative of the whole. Each of the SME

Types and Groups in this table provide responses to the questionnaire as individual entities

and their answers are represented numerically in the table position allocated to them.

52

Table 4.0: The SME types and their respective Group make-up.

GROUP G R O U P: < 50 Employees

SME TYPE Designated 50+

Employees White African Indian Coloured White/African

Partnership White/Indian partnership

Indian/African Partnership

SME TYPE

TOTAL

Percentage of Total

SME TYPE

Attorneys 0 3 2 0 0 0 0 0 5 3.65

Building Contractors 6 9 4 2 5 0 0 0 26 18.98

Car Repairers 6 8 2 9 0 1 0 0 26 18.98

Computer Maintenance 0 3 0 3 1 0 3 0 10 7.30

Electrical Contractors 4 3 3 1 0 0 0 0 11 8.03

Electrical Suppliers 4 2 0 4 0 0 0 0 10 7.30

Engineering Contractors 5 3 1 2 1 3 4 0 19 13.87

Engine Reconditioners 0 2 0 1 0 0 0 0 3 2.19

Florists 0 1 0 0 1 0 0 0 2 1.46

Motor Spares Suppliers 0 4 1 4 0 1 1 0 11 8.03

Motor Cycle/Generator

Suppliers 0 2 0 0 0 0 0 0 2 1.46

Panel Beaters 0 0 0 7 2 0 0 0 9 6.57

Printers 0 2 0 0 0 0 0 1 3 2.19

Group TOTAL 25 42 13 33 10 5 8 1 137

Percentage of TOTAL SMEs 18.25 30.66 9.49 24.09 7.30 3.65 5.84 0.73 100

The SME Type was selected at random as the inclusion of all the various SME Types in

the sample would have been unmanageable. The samples were drawn from several towns

throughout the KwaZulu Natal region. Each business was approached at random with no

previous insight as to who owned the business.

4.3 HAS THE BUSINESS ENVIRONMENT CHANGED?

The survey needed to know how the business environment had changed, if at all, for SMEs

since the introduction of the Employment Equity Act.

Table 4.1: The number of SMEs who feel the business environment HAS CHANGED FOR THE BETTER since the introduction of the Employment Equity Act.

GROUP G R O U P < 50 Employees





SME TYPE

TOTAL

Response RATIO

Percentage of Total

SME TYPE

Attorneys 0 0 0 0 0 0 0 0 0:5 0

Building Contractors 4 0 4 2 5 0 0 0 15:26 57.69

Car Repairers 0 0 2 6 0 1 0 0 9:26 34.62

Computer Maintenance 0 0 0 1 1 0 2 0 4:10 40.00

Electrical Contractors 4 0 3 0 0 0 0 0 7:11 63.64

Electrical Suppliers 1 0 0 1 0 0 0 0 2:10 20.00

Engineering Contractors 3 0 1 0 0 3 1 0 8:19 42.11

Engine Reconditioners 0 0 0 1 0 0 0 0 1:3 33.33

Florists 0 0 0 0 1 0 0 0 1:2 50.00

Motor Spares Suppliers 0 0 0 1 0 1 0 0 2:11 18.18


Suppliers 0 1 0 0 0 0 0 0 1:2 50.00

Panel Beaters 0 0 0 5 0 0 0 0 5:9 55.56

Printers 0 0 0 0 0 0 0 1 1:3 33.33

Group TOTAL 12:26 1:42 10:13 17:33 7:10 5:5 3:8 1:1 56:137

Percentage of TOTAL GROUP

48.00 2.38 76.92 51.52 70.00 100.00 37.50 100.00

Percentage of ALL SMEs

sampled

40.88

53

The study also required to know what the ‘atmosphere’ is like in which the SMEs were

working. This helped identify any Group that was apart from the general trend. Table 4.1

above shows that the environment improved for most Groups. The ratio number to the

Table 4.2: The number of SMEs who feel the business environment HAS NOT CHANGED since the introduction of the Employment Equity Act.






SME TYPE

TOTAL Response

RATIO

Percentage of Total

SME TYPE

Attorneys 0 0 0 0 0 0 0 0 0:5 0


Car Repairers 6 2 0 3 0 0 0 0 11:26 42.31






Florists 0 0 0 0 0 0 0 0 0:2 0



Suppliers 0 1 0 0 0 0 0 0 1:2 50.00

Panel Beaters 0 0 0 2 0 0 0 0 2:9 22.22

Printers 0 1 0 0 0 0 0 0 1:3 33.33

Group TOTAL 10:26 8:42 1:13 14:33 1:10 0:5 3:8 0:1 37:137


40.00 19.05 7.69 42.42 10.00 0 37.50 0


sampled

27.01

right of the colon in the table is placed for comparison of the total responding to the total

SME Type/Group surveyed.

54

Table 4.2 above illustrates those who felt the business environment had not changed.

Attorneys felt in Table 4.3 that the environment had changed for the worse. This may

Table 4.3: The number of SMEs who feel the business environment HAS CHANGED FOR THE WORSE since the introduction of the Employment Equity Act.






SME TYPE

TOTAL

Response RATIO

Percentage of Total

SME TYPE

Attorneys 0 3 2 0 0 0 0 0 5:5 100.00


Car Repairers 0 6 0 0 0 0 0 0 6:26 23.08






Florists 0 1 0 0 0 0 0 0 1:2 50.00



Suppliers 0 0 0 0 0 0 0 0 0:2 0

Panel Beaters 0 0 0 0 2 0 0 0 2:9 22.22

Printers 0 1 0 0 0 0 0 0 1:3 33.33

Group TOTAL 3:25 33:42 2:13 2:33 2:10 0:5 2:8 0:1 44:137


12.00 78.57 15.38 6.06 20.00 0 25.00 0


sampled

32.12

well be attributed to the environment that they work in as lawyers, perhaps directly seeing

the conditions business is operating under. White SMEs voiced in the majority that the

environment had changed for the worse.

55

4.4 CHANGES IN BUSINESS TURNOVER

How economic trends were moving is presented in Tables 4.4 and 4.5. The questionnaire

Table 4.4: The number of SMEs who feel the business turnover HAS CHANGED FOR THE BETTER since the introduction of the Employment Equity Act.






SME TYPE

TOTAL Response

RATIO

Percentage of Total

SME TYPE

Attorneys 0 3 2 0 0 0 0 0 5:5 100.00


Car Repairers 6 2 2 5 0 1 0 0 16:26 61.54






Florists 0 1 0 0 1 0 0 0 2:2 100.00



Suppliers 0 2 0 0 0 0 0 0 2:2 100.00

Panel Beaters 0 0 0 5 1 0 0 0 6:9 66.67

Printers 0 2 0 0 0 0 0 1 3:3 100.00

Group TOTAL 25:25 16:42 12:13 21:33 4:10 5:5 5:8 1:1 89:137


100.00 38.10 92.31 63.64 40.00 100.00 62.50 100.00


Sampled

64.96

asked for turnover movement on a yearly basis from 1996 to 2002. Most SME Groups

were positive, reporting that turnover was better.

56

57

There are two exceptions to the positive trend, that being the White and Coloured SME

Groups. The Attorneys reported unanimously that turnover was better as did several other

businesses.

There are some businesses experiencing a downturn in trade as shown in Table 4.5.

Table 4.5: The number of SMEs who feel the business turnover HAS CHANGED FOR THE WORSE since the introduction of the Employment Equity Act.






SME TYPE

TOTAL Response

RATIO

Percentage of Total

SME TYPE

Attorneys 0 0 0 0 0 0 0 0 0:5 0


Car Repairers 0 6 0 4 0 0 0 0 5:26 50.00






Florists 0 0 0 0 0 0 0 0 0:2 0

Motor Spares Suppliers 0 0 0 0 0 0 0 0 0:11 0


Suppliers 0 0 0 0 0 0 0 0 0:2 0

Panel Beaters 0 0 0 2 1 0 0 0 3:9 33.33

Printers 0 0 0 0 0 0 0 0 0:3 0

Group TOTAL 0:25 26:42 1:13 12:33 6:10 0:5 3:8 0:1 48:137


0 61.91 7.69 36.36 60.00 0 37.50 0


Sampled

35.04

Whether this can be attributed to other factors such as the economy or management style

and prices for example, further study would be required outside this research.

4.5 CHANGES IN EMPLOYEE BASE

The Employment Equity Act prescribes in Chapter 1, section 1.1, paragraph (b) (Appendix

Ia) that ‘affirmative measures are to be redressed within Designated Groups to ensure

equitable representation… in the workforce’. For businesses to obtain work from any

organ of the state, it must comply with the Act and obtain a compliance certificate

(Appendix Ia, Chapter VI, subsection 5.1). Tables 4.6 to 4.8 illustrate movements in

employee base. Movements may be attributed to downsizing, expansion and growth or

stagnation.

From the Tables, trends for either positive or negative growth can be identified with

respect to each group. Further investigation outside this study is recommended on to what

extent business is moving to automated labour in preference to manual labour. This could

be associated with businesses reducing the impact of various government legislations.

From the Table 4.6, pronounced employee base growth is shown in all Groups except the

White, Indian and Coloured. Of the businesses, Attorneys have one of the highest

increases in employee base growth.

58

The Designated Group and the Groups with partnerships with Africans in Table 4.6 show a

hundred percent response to employee base growth.

Table 4.6: The numbers of SMEs who state that their employee base HAS INCREASED since the introduction of the Employment Equity Act.






SME TYPE

TOTAL Response

RATIO

Percentage of Total

SME TYPE

Attorneys 0 3 2 0 0 0 0 0 5:5 100.00


Car Repairers 6 0 2 5 0 1 0 0 14:26 53.85






Florists 0 0 0 0 0 0 0 0 0:2 0



Suppliers 0 2 0 0 0 0 0 0 2:2 100.00

Panel Beaters 0 0 0 4 0 0 0 0 4:9 44.44

Printers 0 1 0 0 0 0 0 1 2:3 66.67

Group TOTAL 25:25 9:42 10:13 14:33 1:10 5:5 7:8 1:1 72:137


100.00 21.43 76.92 42.42 10.00 100.00 87.50 100.00


Sampled

52.55

In Table 4.7, thirty percent of the Indian Group indicates no change in their employee base,

and the major response came from the motor trade sector. This could reflect economic

59

conditions within this particular sector. However if the total response is added to the

response from SMEs that their employee base has decreased as shown in Table 4.8, then a

Table 4.7: The number of SMEs who state that their employee base HAS NOT CHANGED since the introduction of the Employment Equity Act.






SME TYPE

TOTAL Response

RATIO

Percentage of Total

SME TYPE

Attorneys 0 0 0 0 0 0 0 0 0:5 0


Car Repairers 0 2 0 0 0 0 0 0 2:26 7.69





Engine Reconditioners 0 0 0 0 0 0 0 0 0:3 0

Florists 0 0 0 0 0 0 0 0 0:2 0



Suppliers 0 0 0 0 0 0 0 0 0:2 0

Panel Beaters 0 0 0 2 0 0 0 0 2:9 22.22

Printers 0 0 0 0 0 0 0 0 0:3 0

Group TOTAL 0:25 2:42 2:13 10:33 2:10 0:5 1:8 0:1 17:137


0 4.76 15.38 30.30 20.00 0 12.50 0


Sampled

12.41

net figure of forty-seven percent indicates no growth in the employee base. The White and

Coloured Groups show the highest decrease in employee base as shown in Table 4.8.

60

Results indicate an employee base decrease within the Groups that are not designated nor

have an African owner/partner.

Table 4.8: The number of SMEs who state that their employee base HAS DECREASED since the introduction of the Employment Equity Act.






SME TYPE

TOTAL Response

RATIO

Percentage of Total

SME TYPE

Attorneys 0 0 0 0 0 0 0 0 0:5 0


Car Repairers 0 6 0 4 0 0 0 0 10:26 38.46






Florists 0 1 0 0 1 0 0 0 2:2 100.00



Suppliers 0 0 0 0 0 0 0 0 0:2 0

Panel Beaters 0 0 0 1 2 0 0 0 3:9 33.33

Printers 0 1 0 0 0 0 0 0 1:3 33.33

Group TOTAL 0:25 31:42 1:13 9:33 7:10 0:5 0:8 0:1 48:137


0 73.81 7.69 27.27 70.00 0 0 0


Sampled

35.04

In the next section management growth is determined as prescribed by the EEA.

61

62

4.6 HAS MANAGEMENT GROWTH OCCURRED AS PRESCRIBED

BY THE EMPLOYMENT EQUITY ACT?

EEA-defined management growth entails management positions either created or now

occupied by previously disadvantaged persons.

Table 4.9: The number of SMEs who state that management growth HAS INCREASED since the introduction of the Employment Equity Act.

GROUP G R O U P <50 Employees

SME TYPE Designated

50+ Employees

White African Indian Coloured White/African Partnership

White/Indian partnership


SME TYPE

TOTAL Response

RATIO

Percentage of Total

SME TYPE

Attorneys 0 3 2 0 0 0 0 0 5:5 100.00


Car Repairers 6 2 0 0 0 1 0 0 9:26 34.62






Florists 0 0 0 0 0 0 0 0 1:2 50.00



Suppliers 0 0 0 0 0 0 0 0 0:2 0

Panel Beaters 0 0 0 0 0 0 0 0 0:9 0

Printers 0 0 0 0 0 0 0 1 1:3 33.33

Group TOTAL 24:25 10:42 3:13 2:33 0:10 5:5 7:8 1:1 52:137


96.00 23.81 23.08 6.06 0 100.00 87.50 100.00


Sampled

37.96

In accordance with complying with the Act, the Designated Group indicated the largest

management growth. The formation of partnerships is interpreted as complying with the

Act in order to secure business. This is shown in Table 4.9, where the Partnership Group

also showed a marked increase. In Table 4.10, the African, Indian and Coloured Groups

Table 4.10: The number of SMEs who state that there has been NO MANAGEMENT GROWTH since the introduction of the Employment Equity Act.






SME TYPE

TOTAL Response

RATIO

Percentage of Total

SME TYPE

Attorneys 0 0 0 0 0 0 0 0 0:5 0


Car Repairers 0 4 2 9 0 0 0 0 15:26 57.69






Florists 0 1 0 0 1 0 0 0 2:2 100.00



Suppliers 0 2 0 0 0 0 0 0 2:2 100.00

Panel Beaters 0 0 0 7 2 0 0 0 9:9 100.00

Printers 0 1 0 0 0 0 0 0 1:3 33.33

Group TOTAL 1:25 19:42 10::13 31:33 8:10 0:5 1:8 0:1 70:137


4.00 45.24 76.92 93.94 80.00 0 12.50 0


Sampled

51.09

illustrated a high proportion of no management growth, whereas, as shown in Table 4.9,

63

Attorneys and Engineering Contractors showed a large growth in management. A very low

proportion of the SMEs sampled illustrated a management growth in decline.

Table 4.11 The number of SMEs who state that MANAGEMENT GROWTH HAS DECREASED since the introduction of the Employment Equity Act.






SME TYPE

TOTAL Response

RATIO

Percentage of Total

SME TYPE

Attorneys 0 0 0 0 0 0 0 0 0:5 0


Car Repairers 0 2 0 0 0 0 0 0 2:26 7.69

Computer Maintenance 0 0 0 0 0 0 0 0 0:10 0

Electrical Contractors 0 0 0 0 0 0 0 0 0:11 0




Florists 0 0 0 0 0 0 0 0 0:2 0



Suppliers 0 0 0 0 0 0 0 0 0:2 0

Panel Beaters 0 0 0 0 0 0 0 0 0:9 0

Printers 0 1 0 0 0 0 0 0 1:3 33.33

Group TOTAL 0:25 13:42 0:13 0:33 2:10 0:5 0:8 0:1 15:137


0 30.95 0 0 20.00 0 0 0


Sampled

10.95

The White and Coloured SMEs in Table 4.11 illustrated the only decline with the majority

being in the building sector.

64

65

4.7 HAS THE EEA HAD AN EFFECT ON PERSONNEL

MANAGEMENT?

From the literature review, the importance of having an internal locus of control is

discussed. The Act precludes any personal judgements a business may take from

Table 4.12: The number of SMEs who state that the Employment Equity Act HAS A LARGE EFFECT on personnel management since its introduction.






SME TYPE

TOTAL Response

RATIO

Percentage of Total

SME TYPE

Attorneys 0 3 0 0 0 0 0 0 3:5 60.00


Car Repairers 5 6 2 9 0 1 0 0 23:26 88.46






Florists 0 0 0 0 0 0 0 0 0:2 0



Suppliers 0 0 0 0 0 0 0 0 0:2 0

Panel Beaters 0 0 0 0 0 0 0 0 0:9 0

Printers 0 0 0 0 0 0 0 1 1:3 33.33

Group TOTAL 18:25 24:42 7:13 9:33 0:10 2:5 2:8 1:1 63:137


72.00 57.14 53.85 27.27 0 40.00 25.00 100.00


Sampled

45.99

experience and places directives in managing its personnel. The implication of the findings

found in Tables 4.12 to 4.15 indicates to what extent the EEA has reduced the SMEs’

internal locus of control on personnel management. The response is mixed, as shown in

Table 4.12, with the Designated Group understandably being affected to a large degree in

order to comply with changes directed by the Act.

Table 4.13: The number of SMEs who state that the Employment Equity Act HAS NO EFFECT on personnel management since its introduction.






SME TYPE

TOTAL Response

RATIO

Percentage of Total

SME TYPE

Attorneys 0 0 1 0 0 0 0 0 1:5 20.00


Car Repairers 1 0 0 0 0 0 0 0 1:26 3.85






Florists 0 1 0 0 1 0 0 0 2:2 100.00



Suppliers 0 2 0 0 0 0 0 0 2:2 100.00

Panel Beaters 0 0 0 5 2 0 0 0 7:9 77.78

Printers 0 2 0 0 0 0 0 0 2:3 66.67

Group TOTAL 1:25 9:42 3:13 13:33 8:10 1:5 4:8 0:1 39:137


4.00 21.43 23.08 39.39 80.00 20.00 50.00 0


Sampled

28.47

66

A high number from the Indian and Coloured Group show in Table 4.13 that they feel the

EEA has had no effect on their personnel management. A mixed response is indicated in

Table 4.14, with no real trend evident.

Table 4.14: The number of SMEs who state that the Employment Equity Act HAS LITTLE EFFECT on personnel management since its introduction.






SME TYPE

TOTAL Response

RATIO

Percentage of Total

SME TYPE

Attorneys 0 0 1 0 0 0 0 0 1:5 20.00


Car Repairers 0 2 0 0 0 0 0 0 2:26 7.69






Florists 0 0 0 0 0 0 0 0 0:2 0



Suppliers 0 0 0 0 0 0 0 0 0:2 0

Panel Beaters 0 0 0 2 0 0 0 0 2:9 22.22

Printers 0 0 0 0 0 0 0 0 0:3 0

Group TOTAL 6:25 9:42 3:13 11:33 2:10 2:5 2:8 0:1 35:137


24.00 21.43 23.08 33.33 20.00 40.00 25.00 0


Sampled

25.55

The next section seeks to identify how SMEs feel about government legislation.

67

68

4.8 WHAT EFFECT DOES GOVERNMENT LEGISLATION HAVE ON

PERSONNEL MANAGEMENT?

Views were sought to identify how the SME owners felt about government legislation

affecting their business. Tables 4.15 to 4.17 indicate their response.

Table 4.15 The number of SMEs who state that Government Legislation affecting personnel management IS NECESSARY AND GOOD THING.






SME TYPE

TOTAL Response

RATIO

Percentage of Total

SME TYPE

Attorneys 0 2 1 0 0 0 0 0 3:5 60.00


Car Repairers 0 0 0 7 0 0 0 0 7:26 26.92






Florists 0 0 0 0 0 0 0 0 0:2 0



Suppliers 0 0 0 0 0 0 0 0 0:2 0

Panel Beaters 0 0 0 4 0 0 0 0 4:9 44.44

Printers 0 2 0 0 0 0 0 1 3:3 100.00

Group TOTAL 4:25 6:42 2:13 17:33 0:10 0:5 3:8 1:1 33:137


16.00 14.29 15.38 51.52 0 0 37.50 100.00 :


Sampled

24.09

The objective is to uncover how SMEs will react to directives made on them which could

be seen as conflicting with their judgement through experience and training. Reference is

made to the literature study concerning the locus of control and adaptability.

Table 14.16: The number of SMEs who state that Government Legislation affecting personnel management is NOT

NECESSARY AND BAD THING.

GROUPS G R O U P <50 Employees





SME TYPE

TOTAL Response

RATIO

Percentage of Total

SME TYPE

Attorneys 0 1 1 0 0 0 0 0 2:5 40.00


Car Repairers 6 8 0 0 0 1 0 0 15:26 57.69






Florists 0 1 0 0 0 0 0 0 1:2 50.00



Suppliers 0 0 0 0 0 0 0 0 0:2 0

Panel Beaters 0 0 0 2 2 0 0 0 4:9 44.44

Printers 0 0 0 0 0 0 0 0 0:3 0

Group TOTAL 20:25 34:42 5:13 10:33 7:10 5:5 2:8 0:1 83:137


80.00 80.95 38.46 30.30 70.00 100.00 25.00 0


Sampled

60.58

In Table 4.15 the Indian Group believed the most that government legislation affecting

personnel management is necessary and a good thing. The majority of the Designated,

69

White and Coloured Groups think it is unnecessary and a bad thing as illustrated in Table

4.16. Half the African Group is not bothered by legislation as shown in Table 4.17.

Table 4.17: The number of SMEs who state that they are NOT BOTHERED by Government Legislation affecting personnel management.

G R O U P





SME TYPE

TOTAL Response

RATIO

Percentage of Total

SME TYPE

Attorneys 0 0 0 0 0 0 0 0 0:5 0


Car Repairers 0 0 2 2 0 0 0 0 4:26 15.38






Florists 0 0 0 0 1 0 0 0 1:2 50.00



Suppliers 0 2 0 0 0 0 0 0 2:2 100.00

Panel Beaters 0 0 0 1 0 0 0 0 1:9 11.11

Printers 0 0 0 0 0 0 0 0 0:3 0

Group TOTAL 1:25 2:42 6:13 6:33 3:10 0:5 3:8 0:1 21:137


4.00 4.76 46.15 18.18 30.00 0 37.50 0


Sampled

15.33

The following Section 4.9 reveals how the freedom of choice of choosing the best person

for the job may be affected by the EEA.

70

71

4.9 DOES THE EEA COMPROMISE THE FREEDOM OF CHOICE IN

EMPLOYING THE BEST PERSON FOR THE JOB?

Freedom of choice affects the locus of control (referred to in the literature study). Table

Table 4.18: The number of SMEs who state that the EEA COMPROMISES THE FREEDOM OF CHOICE in employing the best person for the job.






SME TYPE

TOTAL Response

RATIO

Percentage of Total

SME TYPE

Attorneys 0 3 2 0 0 0 0 0 5:5 100.00

Building Contractors 6 9 3

(1=No) 1

(1=No) 5 0 0 0 24:26 92.31

Car Repairers 6 8 0 (2=No)

8 (1=No) 0 1 0 0 23:26 88.46


Electrical Contractors 4 3 2

(1=No) 1 0 0 0 0 10:11 90.91


Engineering Contractors 5 3 0

(1=No) 0

(2=No) 1 3 4 0 16:19 84.21


Florists 0 1 0 0 1 0 0 0 2:2 100.00

Motor Spares Suppliers 0 4 0

(1=No) 4 0 1 1 0 10:11 90.91


Suppliers 0 2 0 0 0 0 0 0 2:2 100.00

Panel Beaters 0 0 0 6 (1=No) 2 0 0 0 8:9 88.89

Printers 0 2 0 0 0 0 0 1 3:3 100.00

Group TOTAL 25:25 42:42 7:13 28:33 10:10 5:5 8:8 1:1 126:137


100.00 100.00 53.85 84.85 100.00 100.00 100.00 100.00


Sampled

91.97

4.18 illustrates those SMEs who believe the freedom of choice is compromised by the

Employment Equity Act. Those groups that felt the opposite are bracketed within the

Table.

This question received the maximum response from all SMEs stating that their choice is

compromised. The exception is the African Group that is well below the trend.

The topic of racial attitude was surveyed and the following section illustrates the results.

72

73

4.10 SURVEY RESULTS ON WHETHER RACIAL ATTITUDE

HAS CHANGED IN THE WORKPLACE SINCE THE

INTRODUCTION OF THE EEA

Discrimination of any kind is addressed within the Employment Equity Act (Appendix Ia,

Table 4.19: The number of SMEs who state that racial attitude HAS CHANGED FOR THE BETTER since the introduction of the Employment Equity Act.






SME TYPE

TOTAL Response

RATIO

Percentage of Total

SME TYPE

Attorneys 0 3 2 0 0 0 0 0 5:5 100.00


Car Repairers 6 4 1 2 0 0 0 0 13:26 50.00






Florists 0 1 0 0 1 0 0 0 2:2 100.00



Suppliers 0 1 0 0 0 0 0 0 1:2 50.00

Panel Beaters 0 0 0 6 1 0 0 0 7:9 77.78

Printers 0 1 0 0 0 0 0 1 2:3 66.67

Group TOTAL 20:25 29:42 10:13 20:33 7:10 3:5 6:8 1:1 96:137


80.00 69.05 76.92 60.61 70.00 60.00 75.00 100.00


Sampled

70.07

74

Chapter 2, sections 2.1 and 2.2). The topic goes outside the Act as discrimination based on

numerous aspects are addressed within the South African Constitution (Butterworth’s,

1994:185). Table 4.19 above illustrates the majority of the SMEs responded that racial

attitudes have changed for the better. The purpose of this question is to determine whether

any racial attitudes could be associated to trends found within the survey.

Table 4.20: The number of SMEs who state that racial attitude HAS CHANGED FOR THE WORSE since the introduction of the Employment Equity Act.


SME TYPE Designated

50+ Employees

White African Indian Coloured White/African Partnership

White/Indian partnership


SME TYPE

TOTAL Response

RATIO

Percentage of Total

SME TYPE

Attorneys 0 0 0 0 0 0 0 0 0:5 0


Car Repairers 0 4 1 7 0 1 0 0 13:26 50.00






Florists 0 0 0 0 0 0 0 0 0:2 0



Suppliers 0 1 0 0 0 0 0 0 1:2 50.00

Panel Beaters 0 0 0 1 1 0 0 0 2:9 22.22

Printers 0 1 0 0 0 0 0 0 1:3 33.33

Group TOTAL 5:25 13:42 3:13 13:33 3:10 2:5 2:8 0:1 41:137


20.00 30.95 23.08 39.39 30.00 40.00 25.00 0


Sampled

29.93

75

The majority of all SME Groups believe racial attitudes have changed for the better.

Attorneys were again unanimous in recognising a change for the better. However Table

4.20 above shows there are noticeable numbers of SMEs who believe racial attitudes have

changed for the worse.

The next section provides the results of the survey on whether profitability and efficiency

has been affected by the EEA.

76

4.11 SURVEY RESULTS ON WHETHER THE EEA HAS AFFECTED

THE PROFITABILITY AND EFFICIENCY OF BUSINESS

Whether the Employment Equity Act has any effect on SME profitability and efficiency

was posed in the questionnaire. Some SMEs may find that the Act has been to their

Table 4.21: The number of SMEs who state that profitability and efficiency HAS CHANGED FOR THE BETTER since the introduction of the Employment Equity Act.






SME TYPE

TOTAL Response

RATIO

Percentage of Total

SME TYPE

Attorneys 0 0 2 0 0 0 0 0 2:5 40.00


Car Repairers 0 0 2 7 0 1 0 0 10:26 38.46






Florists 0 0 0 0 1 0 0 0 1:2 50.00



Suppliers 0 1 0 0 0 0 0 0 1:2 50.00

Panel Beaters 0 0 0 2 0 0 0 0 2:9 22.22

Printers 0 0 0 0 0 0 0 1 1:3 33.33

Group TOTAL 10:25 1:42 13:13 18:33 3:10 5:5 4:8 1:1 55:137


40.00 2.38 100.00 54.55 30.00 100.00 50.00 100.00


Sampled

40.15

77

operational disadvantage, others may find the opposite. This question was asked to identify

these trends. A one hundred response in the affirmative was received from the African

Group and African Partnership groups as shown in Table 4.21 whereas hardly any White

Group thought that the EEA had improved profitability and efficiency as the other Tables

4.22 and 4.23 illustrate.

Table 4.22: The number of SMEs who state that profitability and efficiency HAS CHANGED FOR THE WORSE since the introduction of the Employment Equity Act.

GROUPS G R O U P <50 Employees





SME TYPE

TOTAL Response

RATIO

Percentage of Total

SME TYPE

Attorneys 0 3 0 0 0 0 0 0 3:5 60.00


Car Repairers 0 8 0 2 0 0 0 0 10:26 38.46






Florists 0 0 0 0 0 0 0 0 0:2 0



Suppliers 0 0 0 0 0 0 0 0 0:2 0

Panel Beaters 0 0 0 0 0 0 0 0 0:9 0

Printers 0 0 0 0 0 0 0 0 0:3 0

Group TOTAL 3:25 31:42 0:13 5:33 1:10 0:5 2:8 0:1 42:137


12.00 73.81 0 15.15 10.00 0 25.00 0


Sampled

30.66

The remaining responses were mixed with a majority of the Coloured Group feeling that

the EEA has not affected business profitability and efficiency as shown in Table 4.23.

Table 4.23: The number of SMEs who state that profitability and efficiency HAS NOT CHANGED since the introduction of the Employment Equity Act.






SME TYPE

TOTAL Response

RATIO

Percentage of Total

SME TYPE

Attorneys 0 0 0 0 0 0 0 0 0:5 0


Car Repairers 6 0 0 0 0 0 0 0 6:26 23.08






Florists 0 1 0 0 0 0 0 0 1:2 50.00



Suppliers 0 1 0 0 0 0 0 0 1:2 50.00

Panel Beaters 0 0 0 5 2 0 0 0 7:9 77.78

Printers 0 2 0 0 0 0 0 0 2:3 66.67

Group TOTAL 12:25 10:42 0:13 10:33 6:10 0:5 2:8 0:1 40:137


48.00 23.81 0 30.30 60.00 0 25.00 0


Sampled

29.20

The final results of the SME survey are presented in Section 4.12. The survey was

conducted to ascertain whether there was a trend of business people leaving South Africa.

78

79

4.12 SURVEY RESULTS OF BUSINESS PEOPLE WHO KNOW OF

OTHER BUSINESS OWNERS WHO HAVE LEFT SOUTH AFRICA

FOR THE REASONS OF AFFIRMATIVE ACTION/EEA DIRECTIVES; FUTURE

EMPLOYMENT PROSPECTS FOR THEIR CHILDREN; LOSS OF FULL CONTROL OF

THEIR BUSINESSES; REVERSE DISCRIMINATION ON BUSINESS DEALINGS

This question produced a wide variety of responses in the comment section. The question

was asked in order to determine whether South Africa is loosing business people, with

their training and experience, to other countries. The conclusion drawn was many of the

respondents voiced that the EEA compounded the difficult environment SMEs had to exist

in. Others viewed it as a failure, for those leaving, to adapt. Crime and the economy were

voiced as main proponents. Others felt that those leaving believed that they no longer have

control of their businesses.

Table 4.24 overleaf shows that over half the SME respondents knew of business owners

who have left South Africa for the reasons stated above. The White Group had the largest

response. The Indian and African Group had the smallest response.

Table 4.24: The number who state that they know of other business people who have left South Africa for the reasons stated in 4.12 above.






SME TYPE

TOTAL Response

RATIO

Percentage of Total

SME TYPE

Attorneys 0 3 1 0 0 0 0 0 4:5 80.00


Car Repairers 3 6 0 2 0 1 0 0 12:26 46.15






Florists 0 0 0 0 1 0 0 0 1:2 50.00



Suppliers 0 2 0 0 0 0 0 0 2:2 100.00

Panel Beaters 0 0 0 3 2 0 0 0 5:9 55.56

Printers 0 2 0 0 0 0 0 0 2:3 66.67

Group TOTAL 16:25 33:42 4:13 9:33 6:10 2:5 3:8 0:1 73:137


64.00 78.57 30.77 27.27 60.00 40.00 37.50 0


Sampled

53.28

Appendix IV provides reference to the research carried out by The Southern African

Migration Project. Data is presented from research carried over the period 1998-99. The

importance of including this secondary data and the above primary data is to establish

whether South Africa is in fact loosing its skilled people to other countries. If so, then there

must be consequences pertaining to the future economic potential of South Africa. South

Africa presently imposes strict immigration policies to protect jobs (Appendix IV).

80

81

4.13 RESULTS DRAWN FROM INTERVIEWS

4.13.1 INTRODUCTION

The Interview Schedule and full transcripts of the interviews carried out are

referenced in Appendix III.

The pilot study, as discussed in the chapter on methodology, revealed that the

majority of interviewees prefer to be interviewed rather than complete

questionnaires. This was especially true of people within large companies, and

government bodies. Anonymity due to the sensitivity of the survey was the main

reason. Many did not want their personal views to become known to their business,

business associates or colleagues.

The decision was made to conduct individual interviews. The interviewer has had

several years of interviewing experience gained from trouble-shooting operational

problems. The interview was directed at seven managers and decision makers

within government bodies, organs of the state and medium to large industrial

companies. Their positions held as decision makers prompted the choice for them

to provide meaningful comments. Their responses are reviewed for analysis and

correlated to responses from the questionnaire. This is useful to check for

discrepancies as it allows for comparison and to use the results from one method to

cross check the results from another. This was discussed within the chapter on

methodology and described as the method of triangulation.

82

4.13.2 PROFILES OF THE INTERVIEWEES: A.1 TO A7

Individual interviews were carried out with various managers of government bodies and

large organizations. Those selected were chosen for their strategic position of being

decision makers in employing the services provided by SMEs.

Table 4.25 illustrates the profiles of these managers. The inclusion of the heading titled

‘Cultural Background and Sex’ was made to eliminate any biases that may arise from the

conclusion of the responses.

Table 4.25: Profiles of the Interviewees.

INTERVIEWEE COMPANY POSITION HELD HOW LONG POSITION HELD AGE CULTURAL

BACKGROUND/SEX

A.1 Government Body (Parastatal) Contracts Manager More than six years Mid Thirties Indian Female

A.2 Listed Company Human Resources Manager For about five years Early Thirties African Male

A.3 Listed Company Chief Engineering Manager For about ten years Early Forties White Male

A.4 Listed Company General Manager For about eight years Late Forties White Male

A.5 Government Body (Parastatal) Fleet Manager For about twelve

years Late Thirties Indian Male

A.6 Public Company (Ex-family business)

Chief Engineering Manager

For about eighteen years Early Forties White Male

A.7 Government Body (Parastatal) Account Executive For about twenty

years Early Fifties White Female

The following pages provide the responses from the topics of the questions asked. These

are provided in Tables 4.26 to 4.33 for ease of reference. Each section gives reasoning for

the question posed and its objective in analysing the results.

83

4.13.3 TABULATED RESULTS FROM THE INTERVIEW PROCESS

4.13.3.1

Issue: Application of Affirmative Action and the EEA

This issue was placed to provide a point of reference and set the focus of the

interviewees’ minds on the subject of the interview. The reasoning was to discover

how each interviewee felt about the implications of Affirmative Action and the

EEA on their jobs. The objective was to establish a possible differential in the Act’s

application from the perspective of two differently governed businesses

(government and private owned). Table 4.26 illustrates the summarized responses

received. All were seen to conform with the prescription of the EEA.

Table 4.26: Application of Affirmative Action and the EEA.

INTERVIEWEE ORGANIZATION’SSTATUS

DESIGNATED EMPLOYER? COMMENTS MADE BY INTERVIEWEE

A1 Parastatal Yes Applied Affirmative Action and EEA principles from date of introduction. Has to deal with a shortage of suitably qualified and experienced contractors. Increased management load. Provides training and skills development.

A2 Public Company Yes Applied Affirmative Action and EEA principles from date of introduction. Preference given to Designated SMEs. Finds job stressful because of the lack of suitably qualified and experienced contractors. Concerned about accidents.

A3 Private Company Yes Applied Affirmative Action and EEA principles long before date of introduction Preference given to Designated SMEs, but flexible in its approach to those not designated. Provides training to fit in with Company and legislative requirements.

A4 Public Company Yes Applied Affirmative Action and EEA principles from date of introduction. Preference given to Designated SMEs.

A5 Parastatal Yes Applied Affirmative Action and EEA principles from date of introduction. Preference given to Designated SMEs.

A6 Private Company Yes Has not applied Affirmative Action but has applied EEA principles from date of introduction. Preference given to Designated SMEs where appropriate. Says White SMEs that it sub contracts to, have adapted themselves to conform with the EEA in order to carry out work for government bodies.

A7 Parastatal Yes Applied Affirmative Action and EEA principles from date of introduction. Preference given to Designated SMEs.

84

4.13.2.2

Issue: Businesses that have ceased trading or downsized

White SMEs, regarded as not designated by the EEA, have suggested that Black

SMEs are receiving preference of work allocation to themselves. According to

these White SMEs, the consequence of this is they (White SMEs) are going out of

business or downsizing. The objective of the issue discussed was to determine

whether large business and/or government bodies are responsible for this in

applying Affirmative Action and EEA directives. Table 4.27 provides the responses

in summary. All the interviewees were aware of SMEs affected adversely by the

EEA.

Table 4.27: Businesses that have ceased trading or downsized.


KNOWS OF DESIGNATED SMES THAT

HAS CEASED TRADING

KNOWS OF OTHER SMES

THAT HAVE CEASED

TRADING:

COMMENTS MADE BY INTERVIEWEE

A1 Parastatal Yes: 1 Yes: 3 One Designated SME failed due to cash flow problems. One White SME ceased trading due to low priority work awarded. Two SMEs failed to adapt to EEA directives and are no longer in business.

A2 Public Company No Yes: 1 Declined to give business, as SME had no Equity Partner. Work allocated to SME conforming to the EEA.

A3 Private Company Yes, knows ‘some’ Yes: ‘some’

No SMEs have ceased trading with the organization because of EEA principles. Knows of SMEs that have ceased trading or downsized because of the EEA.

A4 Public Company No Yes: 2 One White SME, lost government business for not conforming to EEA directives. One White/African Partnership that ran into difficulties and failed.

A5 Parastatal No Yes: ‘some’ Knows of mainly failed White SMEs who did not empower Blacks. Knows of White, Indian and Coloured SMEs who have downsized.

A6 Private Company No Yes No SME has ceased trading with this organization because of the EEA. Knows of quite a few who have failed because they have not adapted to the EEA outside the organization.

A7 Parastatal No Yes Knows of one White SME and some from the other groups.

85

4.13.2.3

Issue: Quality of Service and Workmanship

White SMEs suggest that Black SMEs are being preferentially chosen to the

detriment of quality of service and workmanship. The reason for discussing the

issue is to establish whether the receiver of those services experience a reduction in

quality of service and workmanship. The objective is to establish any difference in

trends and any truth in the statement made by White SMEs. Table 4.28 provides

summarized responses. Parastatals demonstrated that they were the most adversely

affected by the loss of excellent service providers that they attributed to the

implementation of the EEA.

Table 4.28: Quality of service and workmanship.


THE QUALITY OF SERVICE AND

WORKMANSHIP COMMENTS MADE BY INTERVIEWEE

A1 Parastatal Deteriorated Lack of use of technology. Lack of suitable equipment and vehicles.

A2 Public Company Generally deteriorated

Poor plant maintenance quality. However, is very happy with Indian SME supplying computer maintenance.

A3 Private Company Excellent Very satisfied with service and workmanship supplied by SMEs.

A4 Public Company Not been affected Very happy with current quality. There has been no change since the EEA.

A5 Parastatal Deteriorated “Loss of excellent service providers because of EEA”.

A6 Private Company Not been affected Quality has never been affected by the EEA. Only contracts out to the best people in the workplace.

A7 Parastatal Deteriorated Concerned by the loss of excellent service providers who have not conformed to the EEA. Has less control to regulate suppliers and contractors.

86

4.13.2.4

Issue: The benefits of the EEA to their business

The issue was raised to discover whether the EEA had contributed to any positive

and/or negative effects on these organizations. The objective is to establish an

overall perspective on how the EEA has influenced their business operations. Table

4.29 lists their response. The majority of the interviewees felt that the EEA

contributed to the image of the organization as being active in applying equal

opportunities and the upliftment of previously disadvantaged people.

Table 4.29: Whether the EEA has been beneficial to their business.


HAS THE EEA BEEN

BENEFICIAL TO THE

BUSINESS?


A1 Parastatal Yes Has Helped in allocating Low Voltage work to lower grade contractors. Work that the higher graded contractors do not readily accept.

A2 Public Company Yes Beneficial to the company as it has gained international acceptance as an Equal Opportunity Employer.

A3 Private Company No Management skills and not the EEA have been beneficial to the company because it has always been an Equal Opportunity Employer.

A4 Public Company No The EEA has not affected his company.

A5 Parastatal Yes Beneficial to the company as it has brought about upliftment of previously disadvantaged people. [Social Acceptance].

A6 Private Company Yes Has been an important aid for the company to gain business. Is beneficial to the company, as it has brought about upliftment of previously disadvantaged people. [Social Acceptance].

A7 Parastatal Yes Has been beneficial to the business as it has increased the skills base for the majority of the population. (Social Acceptance and Skills Development).

87

4.13.2.5

Issue: Freedom of choice in choosing the best person for the job

The reason for discussing this issue is to discover whether individual power of

judgment and decision-making is overridden by the EEA. The objective is to

establish whether the EEA influences the decision maker’s professional ability in

providing the best person for the job, thereafter possibly affecting the quality of

service and workmanship supplied to them. Table 4.30 provides a summary of the

various responses given. The majority of the interviewees agreed that freedom of

choice had been detrimentally affected.

Table 4.30: Freedom of choice in choosing the best person for the job.


HAS THE EEA COMPROMISED

THE FREEDOM TO CHOOSE THE BEST PERSON FOR THE JOB?


A1 Parastatal Yes Her job has been made more difficult because management directives are in conflict with the EEA directives.

A2 Public Company Yes His job has been made more difficult because the EEA has restricted choice of available contractors with sufficient skills and experience.

A3 Private Company Yes Feels that freedom of choice has been compromised but management skills are in place to handle each situation to the company’s advantage.

A4 Public Company Yes Job is a little more difficult because the EEA has restricted the available choice of contractors with sufficient skills and experience.

A5 Parastatal Yes Job is much harder now because there is a restricted choice of available contractors with sufficient skills and experience.

A6 Private Company No Contractors have adapted to suit the company’s needs.

A7 Parastatal Yes Job has place more pressure on her as the EEA has restricted her in utilizing the best contractors available.

88

4.13.2.6

Issue: Racial Attitudes

The issue of racial attitudes is made because the application of Affirmative Action

principles and the EEA has encouraged accusations of discrimination. The

objective is to establish whether an atmosphere of racial tolerance exists in the

interviewee’s workplace and whether this may be carried over into the environs of

the suppliers and service providers. This could possibly be the accepted attitudinal

norm as endorsed by the prescriptions of Affirmative Action and the EEA. Table

4.31 provides the responses in summary. Parastatals indicated that there was

certainly an increase in racial tension. Private organizations responded that there

were little or no racial issues within their workplace.

Table 4.31: Whether racism has increased in the workplace.


DO YOU FEEL THERE HAS

BEEN AN INCREASE IN

RACISM IN THE WORKPLACE?


A1 Parastatal No Racial attitudes have changed for the better; there is more tolerance and understanding.

A2 Public Company No There is a lot more tolerance now. More teamwork, co-operation and communication. Aware of reverse discrimination amongst White employees and white business owners. They must learn to adapt.

A3 Private Company No Always great interracial harmony within company. Understands some racial disharmony within other companies who have put whites out of work.

A4 Public Company No Have a close community within the workplace and everyone gets on very well. Has heard of reverse discrimination voiced by White contractors and business people.

A5 Parastatal Yes Mainly discrimination. Preferential promotions instituted as per the EEA. Retrenchments of people in groups other than Africans. Feelings of reverse discrimination amongst White contractors and suppliers as well as White internal staff.

A6 Private Company Not sure Feels there has always been racism in the workplace. Believes there is less tension now that people have equal rights.

A7 Parastatal Yes Believes there is an element of racism from African management levels. Says that some staff believes they have been victimized because they are White. It is hard to prove racism, and it is a dismissible offence.

89

4.13.2.7

Issue: Profitability and Efficiency within the Business

A question was made to establish whether a link could be made between work

supplied by SMEs and any changes in the operations of the larger organizations.

The objective is to reinforce any detrimental effects of quality of workmanship and

service that may be experienced, which in turn may reduce the profitability and

efficiency within the larger organisations. Table 4.32 provides an insight which

revealed mixed responses.

Table 4.32: Whether profitability and efficiency has changed within the business?


HAS PROFITABILITY

AND EFFICIENCY CHANGED [SINCE

THE INTRODUCTION OF THE EEA]?


A1 Parastatal Yes Efficiency has worsened because she has to manage some of the Designated SMEs jobs that they should be able to do themselves. Their lack of technological equipment hampers communications with them. Jobs running over schedule then decrease profitability.

A2 Public Company Yes Loss of production has reduced productivity. Plant downtime was excessive due to the inexperience of the contractor.

A3 Private Company No Increased profitability and efficiency.

A4 Public Company No No change for the worse, business is ‘booming’.

A5 Parastatal Yes Not sure about profitability. Efficiency has changed for the worse. Wait longer for vehicle repairs. More breakdowns. Believes profits may have dropped because vehicles are not ‘earning their keep’.

A6 Private Company No Believes management abilities and skills are responsible for keeping the company efficient and profitable. Nothing to do with the EEA.

A7 Parastatal Yes It has to be worse. A lot of expertise and knowledge gained over many years has been lost.

90

4.13.2.8

Issue: Knowledge of other SMEs that are growing well

The study needs to discover whether there is growth in the SME quarter. The issue

was raised with the objective of finding out what growth is seen to be occurring, if

any, from the perspective of the government bodies and larger organizations. Table

4.33 reflects the responses that gave support to the fact that African SMEs were

seen to be doing well.

Table 4.33: Knowledge of other SMEs that are growing well.


KNOWLEDGE OF OTHER SMEs THAT

ARE GROWING WELL

COMMENTS MADE BY INTERVIEWEE ARE THEY WHITE SMEs?

A1 Parastatal Yes They have good communications, computers, e-mail and are financially sound. They also have the right vehicles to do the job.

No

A2 Public Company Yes Heard of some doing well. No

A3 Private Company Yes No comment made. No

A4 Public Company Yes Lots of them, all have a major Black involvement in the business. No

A5 Parastatal Yes Especially those contractors who are doing line installation. No

A6 Private Company Yes [All our contractors] No

A7 Parastatal Yes Especially those that are well managed and experienced. Some

Discussion and analysis of the Interviewees’ response in conjunction with the results of the

questionnaire is carried out in Chapter 5.

91

CHAPTER 5

DISCUSSION AND ANALYSIS OF FINDINGS

5.1 INTRODUCTION

The purpose of the literature review is to establish what the suggested criteria is for SMEs

to be a success. The research identifies whether the EEA has brought about circumstances

affecting SMEs in their quest to become and remain successful.

The relevance of the literature study so far is to demonstrate the existence of the

polarisation of views and standpoints regarding the issues of the EEA. Expertise within the

SME base cannot afford unnecessary erosion of skills or loss of jobs.. The study provides a

basis of understanding SMEs and to what effect the EEA has on them in the South Africa

economic environment. Research within this dissertation identifies what contributes to

meaningful growth of SMEs. How the EEA influences this is contributory to the objectives

of this dissertation.

5.1.1 RESTATEMENT OF THE RESEARCH OBJECTIVE

Information gathered from the literature review provides discussion on whether

there is support to the hypothesis that Black SMEs are being preferentially chosen

as suppliers of services and product to large organizations and government bodies,

based on being previously disadvantaged business entities, to the detriment of

92

quality and experience. In conjunction with the results from the questionnaire and

the interviews, it can be ascertained whether Objective Nos. 1-3 have been met.

5.2 DISCUSSION APPLICABLE TO THE RESEARCH OBJECTIVES

Maas and De Conings’ (1999) conclusion is that skill and behavioural issues are important

and an external environment that supports and stimulates creativity, must be created and

maintained. This section meets the research objective 1.

The presence of the EEA in South Africa needs further investigation as to whether it

supports and stimulates, as well as generates and maintains, creativity. This statement is

made in questioning the objectives of the Act. For example, in Figure 5.1 it is

Figure 5.1 : Chapter I – Definitions, purpose, interpretation and application. – Purpose.

Chapter I – Definitions, purpose, interpretation and application 1.1 Purpose of the Act: Section 2

The purpose of the Act is to achieve equity in the workplace by:

a) promoting equal opportunity and fair treatment in employment through the

elimination of unfair discrimination; and

b) implementing affirmative action measures to redress the disadvantages in

employment experienced by designated groups, to ensure their equitable

representation in all occupational categories and levels in the workforce.

clear that the Act is not intended for the benefit of SMEs or small business in general, but

for the benefit of those employees or potential employees who were previously

disadvantaged.

93

Information gathered from the interviews, summarised in Chapter 4, indicated that some of

those who were responsible for awarding work to contractors and suppliers have applied

the EEA vigourously. In all cases where the interviewees are accountable for

bureaucratical directives, economic goals are placed in second place. Only one major

privately owned large business illustrated entrepreneurial incentives by adapting the EEA

to its advantage economically. However, the interviewees believe that the EEA has been

beneficial to their business except Interviewee A.4 who states that the EEA has not

affected his business. Apparently all the interviewees knew of many Black SMEs that were

growing well.

The effect that the EEA has had on SMEs since its inception is reflected in the

questionnaire responses illustrated in the previous chapter. That the business environment

has changed for the worse, the White Group response to the questionnaire indicates the

highest figure from the total SME Group sampled. Whereas the Black Group response that

the business environment has changed for the better, indicates the highest figure from the

total SME Group.

Response to the questionnaire presented similar trends for business turnover. In fact the

Designated Group, the White/African and Indian/African partnerships all said that business

turnover was better and ninety-two percent of the African Group responded positively. In

addition, the Indian Group and White/Indian partnership both responded that business

turnover was better. Conversely, sixty-two percent of the White Group and sixty percent of

the Coloured SME Group indicated a worsening of business turnover. Apparently, not all

of the Black SMEs are benefiting financially by application of the EEA (Coloured SMEs

94

have experienced a decline in business turnover). However evidence still supports the fact

that White SMEs have been detrimentally affected.

The application of the EEA in awarding work preferentially to Black and Designated

groups is highly evident. Thus White owned business has to adapt to the work environment

that embraces preferential work allocation to previously disadvantaged groups.

5.2.1 ADAPTATION TO CHANGE

From the literature study, Morris and Zahra (2000) believe that this ability to adapt

is a function of the individual owner's ability to learn. This would also apply to

designated and non-designated business owners.

According to Morris and Zahra (2000), adaptation can be conceptualised in terms

of a number of dimensions affecting the business. Personnel are included as part of

this. The EEA is applicable to personnel and therefore concerns the consequences

of adaptation.

The questionnaire reveals some interesting facts. The high numbers of contractors

dealing with government bodies, who have adapted to becoming Designated SMEs,

have benefited financially. Unfortunately the same cannot be said of the White

Group. There again, some White SMEs have adapted by becoming Designated

SMEs whilst others have formed partnerships with African or Indian Groups.



95

The interviews reveal that those companies awarding work to contractors and

suppliers bring much pressure upon them to conform with the EEA. This is

particularly evident in the attitude of the government bodies possibly explained by

the direct accountability to government. As stated by Morris and Zahra (2000),

‘…therefore when owners [SMEs] find their environment destabilizing, adaptation

becomes a critical strategy…’

Consequently, the interviews and questionnaire support the hypothesis presented in

this dissertation in so far that Black small business owners are being preferentially

chosen as suppliers of services and product.

5.2.2 AMBIGUITY

Referring to Figures 5.2 and 5.3, the EEA contains text referring to non-

discriminatory practices.

Figure 5.2 : Chapter I – Definitions, purpose, interpretation and application. - Ambiguity

Chapter I – Definitions, purpose, interpretation and application Purpose of the Act: Section 2


a) promoting equal opportunity and fair treatment in employment through the

elimination of unfair discrimination; and

b) implementing affirmative action measures to redress the disadvantages in

employment experienced by designated groups, to ensure their equitable

representation in all occupational categories and levels in the workforce.

96

Ambiguity exists between a) and b) above, introducing a paradox in discrimination

against non-designated groups, i.e. White males, which is ‘excused’ by the

provision of Chapter II; 2.2, of the Act, as illustrated in Figure 5.3. Ambiguity is

presented yet again if sections 2.1and 2.2 in Figure 5.3 are compared.

Figure 5.3 : Chapter II - Prohibition of Unfair Discrimination

2. Chapter II - Prohibition of Unfair Discrimination 2.1 No person may unfairly discriminate, directly or indirectly, against an employee in any

employment policy or practice, on one or more grounds including race, gender,

pregnancy, marital status, family responsibility, ethnic or social origin, colour, sexual

orientation, age, disability, religion, HIV status, conscience, belief, political opinion,

culture, language and birth.

2.2 It is not unfair discrimination to promote affirmative action consistent with the Act or to

prefer or exclude any person on the basis of an inherent job requirement.

The definition of a Designated Employer, extracted from the Summary of the

Employment Equity Act (Appendix Ia), is presented in Figure 5.4.

Figure 5.4 : Application of the Act: Section 4 - The definition of a Designated Employer.

1.2 Application of the Act: Section 4 c) A designated employer means an employer who employs 50 or more employees,

or has a total annual turnover as reflected in Schedule 4 of the Act, municipalities

and organs of the state. Employers can also volunteer to become designated

employers.

d) A designated group means Black* people, women or people with disabilities.

* The term Black people refers to African, Asian and Coloured people collectively.

97

It is in the context of ambiguity that non-designated White business-owners are

perhaps interpreting the EEA as having the effect of placing them at a business

disadvantage.

To what effect this ambiguity has had on business owners and those that use their

services is found in the response to the questionnaires and the interviews carried

out.

5.2.2.1

Racial Attitudes

When asked whether racial attitudes have changed since the introduction of the

EEA, the questionnaire revealed that for every one SME business owner who

believes that racial issues have become worse, two believe to the contrary.

In fact, the opinions in the interviews expressed racial uneasiness from within the

parastatals. This may be attributed to their future privatisation. The visibility of

retrenchments and high mobility of management under affirmative action measures

may be the trigger that has encouraged accusations of discrimination from White

suppliers and contractors. The direct influence and pressure from government on

these parastatals presents a bias in the interpretation of the ambiguity of the EEA’s

directives towards Black SME preference. Uneasy responses made it evident that

the subject is very sensitive and deeper investigation was avoided.

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From the private large business sector, racial tolerance and understanding is

reported as being much better. The ambiguity of the EEA has been interpreted with

fairness. It was encouraging to see that these large companies have instituted action

plans to encourage previously White owned businesses to change and adapt their

businesses to conform to the directives of the EEA. This has been done without

totally declining business to their existing White SME contractors and suppliers

before they have had reasonable time to adapt. After all, the EEA allows big

business a set number of years for themselves to adapt to the objectives of the EEA.

Nevertheless the question is, why have the government bodies not allowed the

same for the White SMEs contracting, or supplying to them? These government

bodies actively ‘close the door’ on White SMEs.

5.2.3 LOCUS OF CONTROL

In the literature review, Morris and Zahra (2000) believe that a business becomes

more vulnerable when the owner has limited control over that which affects the

business. Therefore if limited control of personnel is now introduced by the EEA,

stipulating conditions of employing staff, the owner may perceive that he has

become more vulnerable and has lost that internal locus of control.

The EEA has also introduced a destabilising external environment for non-

designated SMEs. Moreover, by the wording of the Employment Equity Act

(Appendix Ia), these non-designated SMEs are organizations that employ less than

50 people. SMEs are free to volunteer for certification as Designated Employers in

order to obtain government business.


99

However, the important fact to remember is that White business people do not

necessarily own all these businesses.

5.2.3.1

Freedom of Choice

From the questionnaires, the question is asked as to whether the EEA compromises

the freedom of choice in employing the best person for the job. Most interestingly,

the question elicited the maximum single response of all questions placed. Almost

ninety-two percent of the total sampled Groups were unanimous in the view that

freedom of choice was compromised in employing the right person for the job.

However, the exceptions were from the African and Indian Groups.

All those interviewed believe the EEA compromised their freedom of choice of the

right contractor for the job. The one exception is Interviewee A.6 who says that

contractors have adapted to suit the Company’s needs.

As a result, a conclusion can be drawn that the EEA has removed the personal

accountability bestowed on decision makers by way of experience, education and

skills in employing the right people for the benefit of the organization.

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5.2.3.2

Personnel Management

As to whether the EEA has any effect on personnel management, the following

responses are found on examining the questionnaire:

Sixty-three of the one hundred and thirty-seven SMEs sampled responded that

the EEA has a large effect on personnel management. This constitutes 45.99

percent of the total sampled.

Seventy-two percent of the Designated Group, fifty-seven percent of the White

Group, fifty-four percent of the African Group, forty percent of the

White/African partnership and the one sole Indian/African partnership believe

the EEA has a large effect on their personnel management. The Indian Group

responded with twenty-seven percent whilst there was a nil percentage from the

Coloured Group.

The conclusion is that the EEA has an effect on personnel management and, in

conjunction with the freedom of choice in choosing the right person for the job, it is

viewed detrimentally to specific Groups of SMEs. Just how detrimental, is

quantified by the response to the next issue.

When questioned about government legislation affecting their personnel

management:

Eighty-three of the one hundred and thirty-seven SMEs sampled responded that

it is not necessary and a bad thing. This constitutes 60.58 percent of the total

sampled.

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Evidently a large proportion of these groups felt their internal locus of control was

affected. Interestingly, the African and Indian Groups produced the lowest response

along with the White/Indian and Indian/African partnerships. The Designated,

White and Coloured Groups therefore appear to be adversely affected by the EEA

in this instance.

It can be understood that business exists to generate profits and growth of income.

When external influences are in conflict with these goals, resistance to change

(Swanepoel, Erasmus, van Wyk and Schenk, 1998:730), can place management in

a predicament. The survival of SMEs is further hampered by government

interference. Apparently there is a management feeling that business should be

allowed to exist and operate within a field that has more specialised experience and

knowledge. This is evident by the response to their freedom of choice to choose the

best person for the job. One is led to believe that government interference with the

management of business is apparently not welcomed.

The argument posed here is that free enterprise has to be allowed locus of control

(Gasse, 1982:57:71). Brockhaus (1982:57-71). It seems ironic that the government

is encouraging privatisation of certain parastatals such as Eskom and Telkom, yet

maintains a policy of legislative directives that impose on free enterprise. The EEA

has genuine objectives for the upliftment of previously disadvantaged groups.

Unfortunately the speed at which it desires for it to be implemented is disrupting

the skills and the experience base of most White and previously White owned

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SMEs. This is seen from the interviews by the response that large organizations,

especially parastatals, gave in their awarding work preferentially to Designated

SMEs. Thus, objective 2 of the study is satisfied from this information.

This reasoning can be seen to support the other part of the hypothesis in that this

results negatively on the economic growth of South Africa.

5.2.4 THE PROPENSITY TO TAKE RISKS

In the literature study, works by Falbe and Larwood (1995) and Morris (1997)

revealed that established entrepreneurs tend to be moderate risk-takers. They make

calculated risk assessments, based on information not available to, or not

appreciated by, others. For White businesses to conform to the requirements of the

EEA, those who possess entrepreneurial spirit may well succeed in taking on a

Black partner in order to gain business. Conversely, others may well have

established themselves with indispensable services or supplies.

One White SME providing services for Interviewee A.7 has certainly positioned

himself as an almost indispensable supplier. By providing high quality service and

workmanship, even this parastatal has acknowledged the worth. The Account

Executive, backed by her management, has presented her case that the use of this

supplier makes economic sense. The supplier had voiced his unwillingness to

introduce a Black partner until a suitably skilled and experienced person could be

Comment: FALBE, C.M., AND L. LARWOOD (1995). "The Context of Entrepreneurial Vision," in Frontiers of Entrepreneurship Research. Ed. W.D. Bygrave, B.J. Bird, S. Birley, N.C. Churchill, M.G. Hay, R. H. Keeley, W.E.Wetzel,Jr. Wellesley, Mass.: Babson College, 187-202.

Comment: MORRIS, MICHAEL H. (1997). Entrepreneurial Intensity. Westport, CT: Quorum Books

103

found. Quite a risk on his part. This White SME stated that he was not prepared to

sacrifice quality of service and workmanship.

This established SME makes full use of his entrepreneurial spirit and has taken a

moderate risk in standing his ground and progressing towards the objectives of the

EEA at his own pace. He has positioned his business to be recognised as a leader in

its field. This adds evidence to conclude that the entrepreneurial qualities discussed

in the literature review will benefit the South African economy and allows the free

enterprise of all SME Groups to become nationally and internationally competitive.

The EEA has introduced a new effect on the equilibrium that existed before its

introduction. In the meantime, previously advantaged White SMEs now have to

strive that much harder to survive the handicap of no longer being awarded work

based on the quality and experience they have to offer. The handicap is based on

them being previously advantaged. A situation that does not make economic sense

when operating within business realms. The issue of quality of service and

workmanship is covered in the following section.

5.2.4.1

Quality of Service and Workmanship

The question of quality of service and workmanship was mentioned earlier and is a

determining factor for Objective 3 of the study. The subject was posed to the

interviewees in question form as to whether the quality of service and workmanship

104

has been affected since the introduction of the EEA. From the interviews,

Interviewees A.1, A.2, A.5 and A.7 all state quality has deteriorated. All of these

interviewees are parastatals except Interviewee A.2. Of the remaining interviewees,

A.3 states that quality has been excellent both before and after the EEA’s

introduction. Interviewees A.4 and A.6 say that quality has never been affected.

An apparent conclusion may be drawn here. Since the parastatals have declined

business to White SMEs at a single stroke, they have lost that quality of service and

workmanship that allowed these SMEs to gain the work in the first place. In fact

the same may be said for the private company of Interviewee A.2. In this instance,

pressure was applied from Board level to employ previously disadvantaged

contractors. The result was that this closed the door on the previous contractor, who

no doubt, according to the manager interviewed, was the best for the job. The

response from Interviewee A.3 says that procedures taken by his company have

ensured a transition over time in training previously disadvantaged SMEs; whereas,

Interviewee A.4 feels fortunate to have found suitable replacements; Interviewee

A.6 has adapted using his entrepreneurial skills and believes that quality of

workmanship has always been the best. [a cryptic comment on his abilities to

manipulate his activities around the Act].

At this stage, part of the hypothesis which states that Black small-business owners

are being preferentially chosen as suppliers of services and product to large

organizations and government bodies based on being Black business entities, to the

detriment of quality and value for money, is partially true. Some large organizations

105

have put in place steps that are designed to safeguard the quality of service and

workmanship they enjoy. Even so, those White SMEs who are not moving to

conditions prescribed by the EEA will, no doubt, eventually lose business.

5.3 DEVELOPING SMALL AND MEDIUM SIZED ENTERPRISES

Literature is abundant worldwide demonstrating that there is no doubt that the advantages

of developing Small and Medium sized Enterprises are to the benefit of all nations’

economic growth. Perhaps, therefore, a more sympathetic approach from the South African

government bodies should be made to make full use of the skills and experience White

SMEs have. Ideally they should be encouraged and not isolated. In fact, the contribution

that the previously advantaged White Group can make to the objectives in skills

development should not be disregarded. Maas and de Coning (1999) add support to this

when they state:

‘…that skill and behaviour issues are important. The stimulation of creativity

therefore cannot only be done by means of training programmes. An external

environment that supports and stimulates creativity must also be created and

maintained…’

Subsequently, one may conclude from the study, so far, that the White SME is at risk of

going out of business The literature study reveals that if the [White] SME adapts by

utilising entrepreneurial characteristics, chances of survival will be that much greater. It

will place the SME at a competitive advantage where other groups may fall short of being

the true entrepreneur as described in the study.

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5.3.1 TRENDS FOR THE FUTURE

It is well known that business exists to create profits for all those that have an

interest in that business. Business economics has always shown that if profits can

not be made, the business closes, moves location or adapts. The study identified

these aspects with support from the questionnaire and the interview process.

5.3.1.1

Profitability and Efficiency

Objective 2 of the study is also addressed within this section. When asked as to

whether the EEA has affected the profitability and efficiency of the business, a one

hundred percent affirmative response was received from the African SME Group

and the White/African and Indian African partnerships Group. Thirty percent of the

Coloured SME Group, fifty-five percent of the Indian Group and forty percent of

the Designated Group responded with saying that profitability and efficiency of

business was better also. Conversely, seventy-four percent of the White SME

Group says that it is worse, thus giving the indication that White SMEs are in fact

detrimentally affected by the EEA. In addition, interviewees from the parastatal

sectors confirm that efficiency and therefore profitability within their section is

affected by EEA directives.

The responses so far modifies the hypothesis that not all Black small-business

owners are being preferentially chosen as suppliers of services and product to

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large organizations and government bodies based on being Black business entities.

In fact the response indicates that there is a definite swing to African SME Group at

the expense of the White Group. In addition, the remaining Groups indicate a

distinctly different trend, but still demonstrate a bias towards the African SME

Group.

With this apparent bias, some SMEs may have already decided to close or sell their

businesses and perhaps leave the country in search of a more equitable business

challenge. To what extent this was occurring is an undetermined factor and support

for any trend was looked for within the questionnaire and by interview.

5.3.1.2

The Loss of Skills, Training and Experience

A question was posed to all SME groups as to whether they know of other business

owners who have left South Africa for particular reasons. Seventy-three of the one

hundred and thirty-seven SMEs sampled responded that they had known business

people who had left South Africa. This constitutes 53.28 percent of the total

sampled.

Therefore, for whatever reason these people have in leaving South Africa, the

challenge of starting life again in a new country may well be more appealing than

remaining in South Africa. The skills and expertise that they take with them are a

loss to the country that provided education and training. If a proportion of those left

108

the country because the EEA has alienated them, then this needs to be addressed by

the government and its bodies. These SME business owners are applying their

entrepreneurial risk taking skills to another country’s economy. The issue of skills

loss by emigration is addressed within the literature review and its associated

appendices. This is a loss South Africa can ill afford to have, and supports the latter

part of the hypothesis in affecting the South African economy.

5.4 ECONOMIC OR EMPLOYEE GROWTH

The questionnaire asked the SME Groups whether their employee base has increased and

whether there has been any management growth as defined by the EEA. Apparently the

majority of the Designated SME Group and the partnerships said there was growth in both

areas. In comparison, there was little or no management growth in the Indian and Coloured

SME Groups respectively. Twenty-three percent of both the White and African SME

Groups said management growth had increased. The African SME Group showed seventy-

seven percent and the Indian Group forty-two percent growth respectively for the

employee base. Here again the White and Coloured SME Groups showed little growth at

twenty-one and ten percent respectively. From these figures it can be seen that growth has

occurred within groups where there is an African SME Group or presence. Interestingly,

the positive growth shown by Attorneys in the questionnaire may well reflect their

professionalism by adhering to the Act as well as procurement of business. The Act

certainly appears to work to their advantage and their businesses have evidently grown.

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5.4.1 THE RELEVANCE OF THE EEA TO ECONOMIC GROWTH

In chapter 2, section 2.5.1, The Relevance of the EEA to Economic Growth, Ziehl

(2000) relates to the EEA and how the Bill (Republic of South Africa, 1996)

referred to the question of economic growth. She made a point of the comments

made by the South African Chamber of Business’s (SACOB) representative. After

taking into account subsequent revelations within the study, some elements appear

to reinforce the comments she made.

From the literature study it was determined that White SMEs made up 73% of the

then SME sector of business. One conclusion can be hypothesised so far, that

being the possible loss of White SMEs resulting in a decline of economic growth.

Further research, may be needed to determine the economic contribution of the

remaining SME Groups, considering both Indians and Coloureds now feel further

alienated by the EEA.

How ironic that Ziehl’s views on the adverse affects of the EEA in the year 2000

are becoming a reality. This is endorsed by the statement made by Rams Ramashia

(2002) at the conference of the Black Management Forum [Section 2.6.2]. The

consequences may not bode well for the small and medium White or even large

businesses in South Africa. The reaffirmation by Ramashia (2002) of South

Africa’s past apartheid preferences to [White] businesses does nothing in support

for willing co-operation from those who believe they are part of the New South

Africa. To allow the inference that being a [White] business is still to be associated

with the apartheid past must be regarded as an insult to all those businesses that


Comment: RamsRamashia (2002) Implement Job Equity or face the state’s wrath. The Business Report 13.10.2002 Page 1. International News and Media Johannesburg Report by Mokgadi Pela.

110

have been proactive in promoting equal opportunity. For those that are responsible

in applying the directives of the EEA, White SMEs will be further alienated. The

feeling may well arise that White business will be associated with being previously

advantaged under an apartheid environment.

Ramashia’s statement ‘…to be fined into bankruptcy…’, is most unfortunate,

especially for those employed by those companies seen to abuse the Act as those

employees may well be out of a job as the business collapses. The statement

certainly reinforces Ziehl’s (2000) study of Organizational Theory where politics

overshadows the economic benefits.

Referring to the question of economic or employee growth, is the EEA viewed by

business as a question of economics; putting people in jobs or politicking and

forever waving the stick at businesses that are associated with the apartheid past?

Here again the view that White SMEs are being discriminated against appears to be

substantive. Accordingly, their expression of dissatisfaction holds an inkling of

justification and, for them, can only contribute to their feelings of being unwanted

and no longer valued for their skills and expertise. No doubt this exacerbates any

first order desires to emigrate to actual motivational action, as supported by the

SAMP reports.

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5.5 OBJECTIVES REALISED

The results from the findings so far have subsequently met the first three out of five

objectives of the study:

1. To analyse the external and internal issues on how the Act affects small and

medium businesses.

2. To analyse and compare businesses that are both directly and indirectly affected

by the Act.

3. To analyse and determine whether the Act has limited the quality and

experience levels available to supplied larger companies and government

bodies.

4. To consider possible management tools and frameworks, in order that solutions

can be found for small and medium businesses that feel constrained by the Act.


businesses to transform them into financially sound and growing businesses

without sacrificing quality and experience.

In the next Chapter, objectives 4 and 5 are addressed and final conclusions are

made with recommendations in light of the effects of the Employment Equity Act

upon Small and Medium Business operations.

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CHAPTER 6

CONCLUSIONS AND RECOMMENDATIONS

6.1 CONCLUSIONS

This study so far has revealed that it is not exhaustive and further study will be needed to

add to the body of knowledge. It has been noted that a full research analysis of the growth

potential for SMEs by Group and Type over periods of time has yet to be published

(National Treasury, 2002:49).

6.1.1 THE HYPOTHESIS

This study has used a multi-faceted approach to investigate the problems White

owned SMEs are experiencing in the South African business market. The research

indicates that the hypothesis is true after modification. The hypothesis can thus be

rephrased as:

Some Black African small-business owners are being preferentially chosen

as suppliers of services and product to large organizations and government

bodies based on being Black African business entities, to the detriment of

quality and value for money previously experienced. This results negatively

in the interests of South Africa’s economy.

Nevertheless, the original hypothesis is found to hold some elements of truth and

has encouraged this study to provide a more accurate assumption with support from

the research carried out.

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6.1.2 WHO IS REALLY BENEFITING - BLACK OR AFRICAN SMES?

Most important is that the research uncovers some other elements not fully

addressed by the Act. The Indian and Coloured Groups are still ‘further down the

line’, than their African counterparts, in gaining work from large business and

government bodies. In the same context and as a consequence of the EEA, the

White Group has been found to be ‘last in line’. However the Designated Group,

although benefiting from awarded work, has the extra burden of new partners and

managers and administrative burdens as directed by the EEA. In qualifying the use

of the word ‘burden’ one must bear in mind that these businesses existed under

their own management directives before the EEA. The EEA has affected their

freedom of choice to select people into their business. As a result, it is viewed that

if the choice of the best candidate for their business is not a previously

disadvantaged person, the likely-hood of their business being ‘fined into

bankruptcy’ (Ramashia, 2002) increases. Under such pressure, the choice large

organisations make in choosing African SMEs as their sole suppliers may be

understandable. White SMEs are therefore going to remain the ‘last in line’ for

work. The internal locus of control for White SMEs has been adversely affected by

the external forces for change brought about by the EEA.

6.1.3 GOVERNMENT BODIES

Parastatals and government bodies under direct order from the government have

closed the door on White owned SMEs. Understandably, these bodies are one of

the largest if not the largest concerns awarding work to contractors and suppliers.

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The result is that the majority of non-designated White owned businesses that did

business with these bodies is now depleted of work that enabled their growth. The

White businessman says that he perceives this as reverse discrimination. To survive

he must use all his entrepreneurial skills to adapt to the directives of the EEA and

how it affects his business. The alternatives are there for him to choose from. The

research indicates that with the necessary skills, experience and finance the

entrepreneurial SME owner will greatly favour the desire to move to where he/she

will be appreciated, rewarded and secure. If this country can provide that then the

White SME may well find renewed challenge to his or her entrepreneurial spirit

and stay.

6.1.4 LARGE ORGANIZATIONS

It may be understood that the main problem is that adaptation by the White SME to

the prescription of the EEA takes time. This is something the government bodies

have not allowed for. However, large organisations have been allowed the time to

conform to the EEA and submit a plan for implementation. The response of some

of the large organizations in the interviews revealed that ‘a blind eye is being

turned’ when using the services of some White SMEs is to their advantage. But

they are apparently under close scrutiny to conform totally by the government and

may well risk very large fines if the transition is not fast enough.

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6.1.5 SMES

It takes time to find the right skills in a prospective partner to fill the role required

by the EEA. Some of those SMEs that have placed a partner in their business to

gain work have found that they are unable to generate the income needed to survive

and grow. Others have been more fortunate. However, the research reveals, some

successful and thriving businesses, even those that employ previously

disadvantaged groups, have now ceased trading or downsized their operations. The

resultant unemployment of mainly previously disadvantaged people certainly

defeats the objectives of the EEA. The rate of economic growth may also be

reduced as business adapts and recovers as efficiently as it can in accommodating

the directives of the Employment Equity Act. Corrective action needs to be

instituted by the government to stop the training skills held by White SME owners

disappearing from South Africa.

There seems no doubt that African SMEs are certainly benefiting from the EEA.

Unfortunately the skills of the remaining Groups are selectively chosen. The

Designated Group of SMEs has taken on the identity of what is prescribed by the

Act. However, the African SME portrays by its status that it is free from previously

advantaged people in control. It is this that will promote the African SME to be the

ideal service provider to large organisations and parastatals who are now seen to

conform unquestionably with the EEA.

But what of the White SMEs? They have contributed to the South African economy

and are responsible for a part of its economic growth to present day. The study

116

provides recommendations which may be of benefit to all participants in the

country’s future business success.

6.2 RECOMMENDATIONS

There is no question that White owned SMEs must adapt. It will require true

entrepreneurial spirit to succeed. Any resistance to the EEA will not benefit them in the

long run. The interests of the previously disadvantaged group will remain a priority. White

businesses will not grow and expand without the element of a previously disadvantaged

person playing a major role in their business. Accordingly, the quest is therefore to find,

and train, that suitable person. At first, tokenism may play an initial role, but the façade

will be short lived. Consequently the goal must be for true employment equity.

Unfortunately for those who feel they are unable to make the grade, they will no doubt

close or sell their businesses, retire or look for pastures new in some other land, where such

issues are not a burden on their business.

It is not an easy quest. The facts from this research speak for themselves. However, the

solution for White owned SMEs needs to be resolved over the short to medium term. But

the transition will be slow if the business is to remain successful. The fact remains that

flexibility has to be allowed for by government bodies. To obtain business on condition

that a previously disadvantaged employee will eventually take the helm as a major

shareholder in the business is a good bargaining angle. Just how much the White owner’s

business is worth to the large organisation or government body will be a determining

factor. The majority of entrepreneurs look for opportunity and niches where others fail to

117

look. With the experience and knowledge that these White businesses have gained as

privileged entities in the apartheid era, the objectives of the EEA could be more

successfully achieved. The South African economy needs to retain all those that have skills

and experience.

The study reveals that some African SMEs are benefiting greatly by the EEA, however the

remaining Black SMEs may also have cause to say they too are no longer being chosen

preferentially as the Employment Equity Act prescribes in its objectives.

6.2.1 OBJECTIVES REALISED

As stated in Chapter 5, the study has realised three of the five objectives of this

dissertation. Objectives 4 and 5 are addressed and restated in this chapter.

6.2.1.1

Objective 4

4. To consider possible management tools and frameworks, in order that

solutions can be found for small and medium businesses that feel they

are constrained by the Act.

South Africa is recognised as a role model, notwithstanding the contribution of

Nair (2002), because there have been other countries who have failed in

successfully implementing their own employment equity. If this is the case, South

Africa is in the process of building frameworks and management tools as a future

118

point of reference. There is insufficient knowledge available as an external true

proof source to build on when venturing into frontiers unknown. When this occurs,

only knowledge and skills learnt from successes and failures can be utilised.

Therefore the only point of reference to be gained from is to succeed where others

have failed, or partially succeeded and find the answers. In conclusion, the study

reveals that White SMEs cannot be isolated from active participation in the growth

of the economy. The government is the major role player to bring this about, where

White SMEs can fully integrate and become part of South Africa’s economic

success. Representations to government from business bodies would enable a

proactive approach in achieving this objective.

6.2.1.2

Objective 5


businesses in order for them to transform into financially sound and

growing businesses without sacrificing quality and experience.

The external force of the EEA that acts upon the locus of control in White SMEs,

has dictated a paradigm shift in the way the business is founded. As such, principles

of change management can be utilised in conjunction with the entrepreneurial skills

these SMEs possess. The works of Carnall (1999), previously mentioned within

this study, can provide a strategy for change. The study has illustrated the qualities

that an SME must have to succeed in the adversity of the business environment.

Whatever strategy that can be suggested from the conclusions of this study, the

119

primary one must be that entrepreneurial qualities venture where others often fear

to go. The entrepreneur with all his skills and experience can utilise all the

information that is at hand and use it to his benefit to succeed and grow. This

dissertation is presented to add to the body of knowledge. It is hoped that this

knowledge can be used to the benefit of those entrepreneurial SMEs, to find

answers in their quest to make their mark within the business fraternity.

6.2.2 CLOSING STATEMENT

The study reveals that the interpretation of the Employment Equity Act needs to be

revisited. Any reference to past apartheid policies and events has no part in the Act

for its application. This needs to be eradicated from people’s minds. The building

of a multicultural economic machine needs all of the best components available -

even the best components are replaced sooner or later.

A statement made by Nair (2002) perhaps, conveys some Indian wisdom;

“There may exist natural inequalities as well as man-made social

inequalities and economic disparities among men and groups within society.

In such a society to pursue the principle of formal or legal equality – which

insists that all men are to treated equally by law – would be only to

perpetuate the existing inequalities, for, ‘the same law for the ox and the

lion is oppression’. Therefore the concept of equality, to be meaningful and

intelligible, should essentially be a dynamic and relative concept, capable of

accommodating into itself the necessary equalization strategies as

120

permissible means to remove the existing social and economic inequalities

and to secure the goal of ‘higher equality’ and social justice.”

The government has to publicly voice the value it has in the skills and experience

for all those that now feel disadvantaged by revising the Employment Equity Act.

Appreciation and recognition of those qualities will encourage growth and

meaningful co-operation to be willingly and equally shared amongst all business

people for the benefit of all South Africans.

121

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132

APPENDICES

APPENDIX I

USER GUIDE ON THE EEA , SUPPLIED BY THE

DEPARTMENT OF LABOUR

EMPLOYMENT EQUITY ACT: USER GUIDE – SECTION 1

Source: The Department of Labour.

a) Did you know that?

The Breakwater Report of July 1999 indicates that in Management:

• White men and women hold 84% of management positions in South African

companies.

• Males of all races hold 83% of management positions.

With regard to Promotions:

• White employees still constitute about 74% of management promotions and

54% of skilled promotions.

In terms of Recruitment:

• General recruitment figures show that Black men are most targeted, BUT

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• Managerial and skilled recruitment figures show that White males are still

favoured. For example, managerial recruitment figures show that the

recruitment rate for White males is 46% followed by White women at 19% and

Black males at 18%.

b) Why should employers implement employment equity?

Not only is there a legal requirement, but good human resource management is

increasingly being regarded as the differentiating factor between businesses.

It follows that to invest in and develop all our people will contribute to business

sustainability and future returns.

Having a workforce that reflects the demographics of the country can improve

market share, better understanding of markets, and thus the ability to service all

current or prospective clients.

c) Who is affected by Chapter 3?

All Designated employers and their employees, particularly those employees from

Designated groups.

Who are Designated Employers?

Designated Employers include:

• Employers who employ 50 or more employees

134

• Employers who employ fewer than 50 employees but whose total annual

turnover equals or exceeds the applicable turnover of a small business in

terms of Schedule 4 of the Act

• An employer appointed by a collective agreement

• Municipalities

• Organs of the state except for:

o The National Defence Force

o The National Intelligence Agency

o The South African Secret Service.

Who are Designated Groups?

Designated Groups are:

• Black people which means African, Coloureds and Indians

• Women

• People with disabilities.

d) What if employees numbers vary from time to time and only

occasionally reach the 50 mark?

Employers who have 50 or more employees at that date on which reports are due,

will be required to report.

135

Similarly employers who have 150 or more employees at the date on which reports

are due, will be required to comply with the reporting requirements of larger

employers.

Should employers avoid reporting requirements by manipulating employees

numbers around these dates, they may be subject to a Director-General’s review.

e) What are the duties of the Employers?

Chapter 3 requires that employers take certain affirmative action measures to

achieve employment equity.

These measures are:

• Employers must consult with unions and employees in order to make sure

that the plan is accepted by everybody

• Employers must analyse all employment policies, practices and procedures,

and prepare a profile of their workforce in order to identify any problems

relating to employment equity.

• Employers must prepare and implement an employment equity plan

setting out the affirmative action measures they intend taking to achieve

employment equity goals.

• Employers must report to the Department of Labour on the implementation

of their plan in order for the Department to monitor their compliance.

136

• Employers must display a summary of the provisions of the Act in all

languages relevant to their workforce. These summaries will be made

available by the Government printers in due course.

“The Employment Equity Act is one of the most significant pieces of legislation to have been passed by the first democratic government of South Africa.”

137

APPENDIX IA

SUMMARY OF THE EMPLOYMENT EQUITY ACT 55 OF

1998 (EEA)

The South African Government’s Department of Labour provides a summary of the

EEA on form EEA3 (Department of Labour, 2000) . The following extracts from

the form are intended to provide a framework of understanding of what the act

entails and its implication on SME’s.

Source: The Department of Labour.

1. Chapter I – Definitions, purpose, interpretation and application

1.1 Purpose of the Act: Section 2


a) promoting equal opportunity and fair treatment in employment through

the elimination of unfair discrimination; and

b) implementing affirmative action measures to redress the disadvantages

in employment experienced by designated groups, to ensure their

equitable representation in all occupational categories and levels in the

workforce.

1.2 Application of the Act: Section 4

c) A designated employer means an employer who employs 50 or more

employees, or has a total annual turnover as reflected in Schedule 4 of

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the Act, municipalities and organs of the state. Employers can also

volunteer to become designated employers.

d) A Designated group means Black people, women, or people with

disabilities.

2. Chapter II - Prohibition of Unfair Discrimination

2.1 No person may unfairly discriminate, directly or indirectly, against an employee

in any employment policy or practice, on one or more grounds including race,

gender, pregnancy, marital status, family responsibility, ethnic or social origin,

colour, sexual orientation, age, disability, religion, HIV status, conscience,

belief, political opinion, culture, language and birth.

2.2 It is not unfair discrimination to promote affirmative action consistent with the

Act or to prefer or exclude any person on the basis of an inherent job

requirement.

3. Chapter III - Affirmative Action

3.1 Duties of a Designated Employer: Section 13

a) A designated employer must implement affirmative action measures for

designated groups to achieve employment equity.

b) In order to implement affirmative action measures, a designated employer

must:

• Consult with employees;

139

• Conduct an analysis;

• Prepare an employment equity plan; and

• Report to the Director General on progress made in the implementation

of the plan.

3.2 Affirmative Action measures: Section 15

a) Affirmative action measures are measures intended to ensure that suitably

qualified employees from designated groups have equal employment

opportunity and are equitably represented in all occupational categories and

levels of the workforce.

b) Such measures must include:

• identification and elimination of barriers with an adverse impact on

designated groups;

• measures which promote diversity;

• making reasonable accommodation for people from designated groups;

• retention, development and training of designated groups (including

skills development); and

• preferential treatment and numerical goals to ensure equitable

representation. This excludes quotas.

c) Designated employers are not required to take any decision regarding an

employment policy or practice that would establish an absolute barrier to

140

prospective or continued employment or advancement of people not from

designated groups.

3.5 Analysis: Section 19

A designated employer must conduct an analysis of employment policies, practices,

procedures and working environment so as to identify employment barriers that

adversely affect members of designated groups. The analysis must also include the

development of a workforce profile to determine to what extent designated groups

are under-represented in the workplace.

3.6 Employment Equity Plan: Section 20

A designated employer must prepare and implement a plan to achieve employment

equity, which must:

• Have objectives for each year of the plan;

• Include affirmative action measures;

• Have numerical goals for achieving equitable representation;

• Have a timetable for each year;

• Have internal monitoring and evaluation procedures, including internal dispute

resolution mechanisms; and

• Identify persons, including senior managers, to monitor the plan.

141

3.7 Report: Section 21

a) The employer, who employs fewer than 150 employees, must submit its first

report to the Director General within 12 months after the commencement of the

Act and thereafter every 2 years on the first working day of October.

b) An employer, who employs 150 or more employees, must submit its first report

6 months after the commencement of the Act and thereafter every year on the

first working day of October.

3.8 Designated employer must assign a manager: Section 24

A designated employer must assign one or more senior managers to ensure

implementation and monitoring of the employment equity plan and must make

available necessary resources for this purpose.

3.9 Income Differentials: Section 27

A statement of remuneration and benefits received in each occupational category

and level of the workforce must be submitted by a designated employer to the

Employment Conditions Commission (EEC).

Where there are disproportionate income differentials, a designated employer must

take measures to reduce it progressively. Such measures may include collective

bargaining, compliance with sectoral determinations (section 51 of the Basic

Conditions of Employment Act); the application of norms and benchmarks

recommended by the ECC, relevant measures contained in skills development

legislation and any other appropriate steps.

142

4. Chapter V – Monitoring, Enforcement and Legal Proceedings

4.1 Monitoring: Section 34

Employee or trade union representatives can monitor contraventions of the Act and

report to relevant bodies.

4.2 Powers of the Labour Inspector: Section 35

Labour Inspectors are authorised to conduct an inspection as provided for in

sections 65 and 66 of the Basic Conditions of employment act.

4.3 Undertaking to Comply: Section 36

If the inspector has reasonable grounds to believe that a designated employer has

failed to comply with its obligations in terms of the Act, the inspector will obtain a

written undertaking to comply within a specific period.

4.4 Compliance Order: Section 37

If the designated employer refuses to comply with the written undertaking, the

inspector will issue an order to comply.

4.5 Review by Director-General: Section 43

The Director-General may conduct a review to determine whether an employer is

complying with the Act. On completion of the review, the Director-General may

take recommendations for compliance within certain time frames.

143

4.6 Powers of the Labour Court: Section 50

The Labour Court has the powers to make any appropriate orders, award

compensation, or impose fines.

4.7 Protection of Employees Rights: Section 51

The Act protects employees who exercise their rights and obligations under the Act

against victimisation, obstruction and under influence.

5. Chapter VI – General Provisions

5.1 State contracts: Section 53

Designated employers and employers who voluntary comply with Chapter III, who

seek to do business with any organ of the state, will have to apply for a certificate from

the Minister confirming their compliance with Chapters II and III of the Act. Non-

designated employers’ compliance certificates will pertain to Chapter II.

5.2 Liabilities of Employers: Section 60

Should employees contravene any provision of this Act, while performing their duties,

the employer will be liable unless the employer can prove that it did everything in its

power to prevent the undesired act.

144

APPENDIX II

SAMPLE OF QUESTIONNAIRE DISTRIBUTED TO SME

GROUPS FOR COMPLETION

SMEs contracted or providing services and supplies to large companies and/or

organs of the State completed Questionnaire. A sample of this questionnaire

follows:

II.1 SAMPLE COVERING LETTER

Chris Bohr P O Box 1122 Empangeni 3880 Tel: 082 8000 700 E-mail: [email protected] Date Address

Reference: Dissertation Questionnaire

Dear Please find attached the questionnaire we recently discussed. The topic I am researching has, in my view, a very important impact on business. Your input is of vital importance in this research. The questionnaire should take up no more than 20 minutes of your time. I have formulated it in a user-friendly presentation. Should you have any difficulties in interpretation, please do not hesitate to contact me by phone (082 8000 700). The questionnaire is totally confidential and will be used solely for my research purposes. I will contact you to arrange collection within the next three days. May I take this opportunity to convey my sincere thanks for your contribution in completing this questionnaire. Kindest regards Chris Bohr

mailto:[email protected]

146

II.2 SAMPLE OF QUESTIONNAIRE

Questionnaire

Applicable to:

Contractors to Government Bodies and Organs of the State

Contractors to Large Private Industrial Companies

Introduction

The Employment Equity Act 1998 is abbreviated to EEA within this questionnaire,

For the purpose of this questionnaire, a previously disadvantaged group can be defined

as Black Africans, Indians and Coloureds; women (including white women); and people

with disabilities (includes people of all race groups and gender).

A designated employer means an employer who employs 50 or more employees, or has a

total annual turnover as reflected in Schedule 4 of the Act, municipalities and organs of the

state. Employers can also volunteer to become designated employers.

The terms Black (African), White, Coloured and Indian are used in this questionnaire.

Their use reflects an important ingredient for researcher’s investigations. The researcher

would deem it highly beneficial if you could provide your ethnic origin (optional) in the

remarks column in section 9.0

1.0 Business Environment Please

Tick

1.1 Have circumstances changed in business dealings with your major customers? Yes No

If yes, in what way has business been affected/changed?

1.2 What do you feel has contributed MOST to this change?

2.0 Turnover and Employee Statistics Please Tick

2.1 Between the following years, did your turnover:

1996-7 1997-8 1998-9 1999-2000 2000-01 2001-02 (Est)

Decrease

Remain the

same

Increase

2.2 Between the following years, did your employee compliment:

1996-7 1997-8 1998-9 1999-2000 2000-01 2001-02 (Est)

Decrease

Remain the same

Increase

2.3 Please indicate staff numbers for the following years:

1997 1998 1999 2000 2001 2002

Black

White

Coloured

Indian

Other

Please Tick

For the extreme worse

Bad Quite Bad OK Good Very Good Extremely Good

Please Tick

Economy Labour Skills Technology Government Legislation

Other- Please specify:

……………………………………………

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2.0 Turnover and Employee Statistics (continued) Please

Tick

2.4 Please provide numbers of personnel in management positions:

1997 1998 1999 2000 2001 2002

Black

White

Coloured

Indian

Other

3.0 Government Legislation Please Tick

3.1 Has government legislation influenced the personnel management within your business? Yes No

If yes, what legislation?

3.2 Please indicate any influence and to what degree that influence has had on personnel

management.

No Expense Little Expense

Large Expense

Prohibitive Expense

Training and skills development

Labour costs: Remuneration

Administration costs

Other costs: Please specify

3.3 To what degree has the following government legislation affected your business operations?

No Effect Little Effect Large Effect Don’t Know

The Labour Relations Act 1995

The Employment Equity Act 1998

The Skills Development Act 1998

Other- Please specify:

148

3.0 Government Legislation (Continued) Please Tick

3.4 How do you feel about government legislation affecting the personnel management of your

company’s employees?

A bad thing Not necessary

Not bothered Necessary A good thing

4.0 The EEA as it applies to your Company Please Tick

4.1 Are you a designated employer within the terms and conditions as prescribed by the EEA 1998? Yes No

4.2 Do you in your position consider the EEA beneficial to your business? Yes No

Not Affected

If yes, why? Please explain in not more than 30 words:

I do not understand the EEA

4.3 Do you consider the EEA beneficial to employees in general? Yes No


Don’t know

149

5.0 Personnel Management Please Tick

5.1 Do you in your position consider the EEA compromises the freedom of choice in employing the

best person for the job?

Yes No

Not affected by the EEA

Do not know about the EEA


5.2 To what degree has the EEA affected the following? Please Tick

Bad Effect No effect Good effect Not affected by the EEA

Employee security

Employees: Control/management

Employment costs

Employee turnover

6.0 Racism Please Tick

6.1 Do you feel that since the introduction of the EEA has there been:

An increase in racism in the workplace? Yes No

A change in racial attitudes? Yes No

An improvement in racial tolerance and understanding? Yes No

Not familiar with the aims and workings of the EEA?

150

7.0 Business Operations Please Tick

7.1 Do you, in your capacity, feel that the EEA has generally affected the profitability and efficiency of

your company?

For the better No change For the worse Don’t know

7.2 Since the introduction of the EEA, do you feel your company has:

Lost Business

Business Unchanged

Gained Business

Don’t know

8.0 Other Businesses’ Operations Please Tick

8.1 Do you know of other businesses that have failed and gone out of business? Yes No

If yes, do you know what contributed to the failure? Yes No

If yes please indicate what you believe contributed to the failure in no more than 30 words:

151

152

8.0 Other Businesses’ Operations (Continued) Please Tick

8.3 Do you know of other businesses that are at risk of going out of business? Yes No

If yes, do you know what is contributing to the demise of the business? Yes No

If Yes, please indicate what you believe is contributing to the demise of the business in no more than 30 words:

8.4 Is the business conducted by a person from a previously disadvantaged group? Yes No

8.5 Do you know of other businesses that are expanding and growing successfully? Yes No

If yes, do you know what is contributing to the success of the business? Yes No

Please illustrate what you believe or know what is contributing to that success in no more than 30 words:

8.6 Is the business conducted by a person from a previously disadvantaged group? Yes No

153

8.0 Other Businesses’ Operations (Continued) Please

Tick

8.7 Do you know of any business operator that has closed or sold the business and taken the

decision to emigrate and conduct business in another country?

Yes No

If yes, what do you believe or know what contributed to the decision? Please illustrate your answer in

not more than 30 words:

8.8 Was the business conducted by a person from a previously disadvantaged group? Yes No

9.0 Personal Information

Name of business *(optional):

Nature of business:

Regional location of business:

Year established:

Year of change of ownership: (if applicable)

Your position in the business: Please Tick

Is the business a family concern? Yes No

Are you, in your personal capacity of a previously disadvantaged group? Yes No

Do you believe that your business now has better prospects for success since the introduction of

the EEA?

Yes No

Please feel free to add any remarks or information that you may feel useful to the researcher. For example, where

you may see your business in five years time, or how you feel about conducting your business in this country under

today’s conditions. Your ethnic* origin and gender would be of valuable input (*optional).

Black White Coloured Indian

The EEA will have no

effect

*Optional>>> Male Female

Thank you for completing this questionnaire

154

155

APPENDIX III

TRANSCRIPTS OF CONDUCTED INTERVIEWS

III.1 INTRODUCTION AND INTERVIEW SCHEDULE

A pilot study revealed that the majority of interviewees preferred to be interviewed rather

than complete questionnaires. This was especially true of people within large companies,

and government bodies. Anonymity was the main reason, as many did not want their

personal views to become known to their business, business associates or colleagues.

The decision was made to conduct individual interviews. The interview was directed at

managers and decision makers within government bodies, organs of the state and medium

to large industrial companies. The questions follow a standard format for each interviewee,

but vary on occasions as the topic digresses occasionally.

III.2 INTERVIEW WITH A.1

The interview is conducted with a Contractor Manager (A.1) of a large government

utility supplier. The interviewee is a middle-aged South African woman of Indian

origin and culture. Anonymity for the interviewee was assured considering the

sensitivity of the questions asked.. The utility is referred to the pseudonym OHM

within this interview.

Interviewer: I would like to ask you a few questions on the subject we previously spoke

about.

A.1: No problem, I am than pleased to help you in your research.

156

Interviewer: Is OHM a designated employer as prescribed by the Employment Equity

Act?

A.1: Yes it is, being a Government concern we have to comply strictly with any

Government Legislation that applies to us.

Interviewer: Before the Employment Equity Act, was OHM active in applying the

principles of Affirmative Action?

A.1: Affirmative Action has been applied to OHM’s employment of staff

procedures since Government introduced directives to do so.

Interviewer: Does OHM apply the principles of preference to designated SMEs, in

awarding contracts, as per the EEA?

A.1: OHM has made it very clear to us in management that designated SME’s

must get their slice of the cake. Unfortunately, there are times where

insufficient, suitably qualified and experienced contractors are not to be

found. So we find ourselves having to take on those SME’s with less

experience in order to indicate that we are in fact making an effort for those

contractors who were previously disadvantaged. I must say it takes a lot of

extra time on my part, to the extent I often manage their business for them.

Interviewer: Have any SMEs ceased trading with you since the implementation of the

EEA?

A.1: As far as I can recall there has only been three. One was an African

contractor; he was finding it very difficult to manage his business. We

provided in house training on business skills and administration, but he

157

found it difficult to budget for specialised equipment and ran into cash flow

problems.

The second was a designated SME, and by that, I mean a 49/51%

White/African partnership. I have a distinct feeling that this was a ‘window

dressing’ exercise. The two partners were always at odds with one another

and the two could not work as a team. One partner was insistent on re-

investment into the business, the other wanted to enjoy the benefits of his

earnings in status upliftment if you get my drift. I gather the business was

dissolved because of cash flow problems as well.

The third was a White owned business whose owner was averse to

introducing a disadvantaged partner. He understood that we would not be

able to give him priority on work allocation. His business was geared to us

as a major source of his income. He wasn’t able to make up the loss of

income and went out of business.

Interviewer: How many SMEs are trading with you at present?

A.1: There are five contractors that are solely African owned. Three are

White/African partnerships and are designated according to the EEA, and

there are two Indian owned businesses.

Interviewer: Are there any of your contractors who are still owned totally by a White

male?

A.1: As far as I know there are not.

158

Interviewer: Have you turned down work for any SME that does not fall in line with the

EEA principles?

A.1: No, not as such. In the beginning [at the introduction of the EEA] all our

contractors were informed that they would have to conform with the EEA

legislation in order to have work awarded by OHM to them. Those that

couldn’t or would not adjust accordingly obviously were not awarded work

so readily. I suppose we did not really refuse work allocation to them, they

were just awarded the lower value jobs and their work with us just fizzled

away.

Interviewer: Has any SME voluntarily ceased trading with you after declining to adopt

EEA directives?

A.1: Oh, yes. I remember there were two White owned contractors I remember

well. They were very ‘anti’ with the idea of having a Black partner in their

business. Especially as they [the White partner] would only have the

minority share. Yes, unfortunately for them they did not adjust and I believe

they are no longer in the business.

Interviewer: Have they now ceased trading altogether?

A.1: One has, he sold his business off and is back working for a company in the

Cape. The other is still in the business but is not contracting.

Interviewer: Do you believe you were contributory to that?

A.1: I am not sure what you mean.

Interviewer: Do you feel your actions caused the demise or downscaling of their business

operations?

159

A.1: I did my job and I am responsible for carrying out the directives of my

bosses. As with any contractor who works for us, there are many conditions

that have to be met. The EEA was just another condition.

Interviewer: Of the SMEs trading with you, how is the quality of service and

workmanship supplied by them?

A.1: In general the service and quality of work has deteriorated. I feel this is

because we have to allow for the upliftment of those contractors who were

previously disadvantaged. There is no doubt that the White/African

partnerships are doing well and they get the top jobs on offer. They are

professional and make use of all the latest technology. The African and

Indian contractors are a little difficult, if that is the right word. They don’t

have e-mail and computers that make my work with them so much easier

and efficient. They even have no fax machines. Because of this, they end up

getting the ‘Low Voltage’ jobs that the bigger contractors don’t really want.

Interviewer: Do you feel the EEA has led to this occurring?

A.1: In a way, yes. Before my job was so much easier. Now I have to take time

out and almost run their businesses for them [the African and Indian

contractors].

Interviewer: Do you believe the EEA is good for your business?

A.1: I mentioned earlier about the LV work. In that area, allocating that work to

those contractors who are not up to the grade. In that area it’s good for our

business. We can get this jobs done, jobs which are not financially attractive

to the more professional contractors.

160

Interviewer: In choosing the best person for the job, does the EEA compromise the

freedom of choice?

A.1: Ah, now there is a loaded question! The Act imposes on our KPI’s that need

to be achieved by management, that being to connect customers in plus,

minus 47 days. The faster the contractor works, regardless of SME status,

he will be issued jobs accordingly. This contradicts management goals to

see that SMEs also get their slice of the cake. Poor performing SMEs cannot

achieve these goals. I hope this answers your question?

Interviewer: So the EEA does affect your freedom of choice to select the best person for

the job?

A.1: Yes.

Interviewer: To digress a little, do you feel that racism has increased in the workplace?

Many white business owners and even whites feel there is reverse

discrimination now.

A.1: I don’t believe racism has increased in the workplace. I thing racial attitudes

have changed for the better and there is more tolerance and understanding.

Interviewer: Going back to the EEA, do you feel profitability and efficiency has

changed?

A.1: As I said earlier, efficiency and profitability has definitely changed for the

worse.

Interviewer: And have you lost any business deals or contracts because of implementing

the EEA?

161

A.1: No, business is as usual. Being government supported acts as a protection,

OHM is a monopoly, and need I say more?

Interviewer: Mmm, …

Do you know of any other businesses that have ceased or about to cease

trading, or downsized because of the implications the EEA had on them?

A.1: No.

Interviewer: On the other hand, are there any SMEs that you know of that are growing

well?

A.1: Oh yes!

Interviewer: And what do you believe has contributed to this success?

A.1: They have good communications, computers, e-mail, and financially sound.

They have the correct tools and equipment, plus the right vehicles to do the

job.

Interviewer: Are they White owned SMEs?

A.1: No.

Interviewer: Thank you so much for your time, I really appreciate your input for my

research. I will give you a draft of our talk so that it is to your approval

before I type it up into my research.

A.1: You are more than welcome, thank you.

162


The second interviewee is a Human Resources Manager (A.2) responsible for

employing contractors on site for plant and equipment maintenance and repair. The

company is highly automated and their employee compliment in house is relatively

small compared with the size and scope of their operation. The name of the

company is referred to under the pseudonym FOIL. The interviewee is an African

male of around thirty-two years. Confidentiality of the interviewee’s identity is

assured.

Interviewer: Is your business concern a designated employer as prescribed by the

Employment Equity Act?

A.2: Yes.

Interviewer: Before the EEA, was your business concern active in applying the principles

of Affirmative Action?

A.2: Yes.

[At this point, the researcher feels the interviewee is a little apprehensive and tries to

encourage him to become more comfortable.]

Interviewer: I must thank you for the time you have given me to carry out my research.

So far with my previous interviews I have discovered so much valuable

information that has helped me achieve a deeper understanding of the job

people such as yourself have to handle and manage.

A.2: That’s OK, I am more than happy to be of help.

Interviewer: Does FOIL apply the principles of preference to designated SMEs as per

the EEA?

163

A.2: Yes it does. As part of a large international group our actions are well

scrutinised. Therefore, any government directives or legislation that is

imposed on us has to be managed effectively. Of course, these directives

come from board level and anything that the government may impose,

which may be detrimental to the company, is represented via the correct

channels.

[The researcher feels there is a little extra information to be gained here and poses the

following question:]

Interviewer: Are you happy with the directives prescribed by the EEA that you have to

act upon?

A.2: Well to tell you frankly, - this interview will be kept anonymous won’t it? -

Interviewer: Of course I have assured you that.

A.2: - Well my job has become so stressful since the instruction by the Board

that my department must employ contractors from the previously

disadvantaged groups.

Interviewer: Oh?

A.2: There just aren’t enough suitably qualified and experienced contractors

available to service our needs, I mean there are plenty of White owned

contractors but I am left in a predicament.

Interviewer: What sort of predicament?

A.2: FOIL has a five-star NOSA rating. Any accidents or mishaps can affect the

status of this division, and I would be ultimately accountable if the cause

was attributed to a contractor employed by my department.

164


EEA?

A.2: Oh, more stress!

Interviewer: Oh?

A.2: I recently had to turn away a White contractor because he did not have the

majority Black partner in his business.

Interviewer: And what happened?

A.2: He refused to place a person in his family business who did not meet up to

his expectations. He did not like the idea of relinquishing control. He was

beside himself not knowing what to do. We were a major supplier for his

services, and his business was the absolute best. He knew every corner of

our plant and all the machinery, its history, the problems and how to rectify

them. Anyhow, the company has had to refrain from renewing his contract

and we have taken on a designated contractor from Gauteng. The problems

this has caused is …. I shudder to think about it. We have had two plant

shut downs, - unplanned - since they have come on site… something we

have never had before. In addition, when I think of the twenty odd

employees the other contractor has out of work now. The guy closed down

the business.

Interviewer: I see. How many SMEs are trading with you at present?

A.2: In my department, about five now. The Purchasing Department has

suppliers who have to conform to the EEA as well. They look after bulk

supplies and the computer-maintenance contractor.

165

Interviewer: Can you tell me how many of each group classification?

A.2: They are all majority African partnerships or sole Indian, - that’s the

computer guy.

Interviewer: You have told me of one instance, have you declined business to any other

SME that does not fall in line with the EEA principles?

A.2: Oh, lots. I get calls and representations all the time for business. If they are

not a designated employer, I have to decline business for them. But they are

new suppliers, I have not declined any other past contractors working for us

other than the one I told you about. The other guys brought in or promoted

an Indian or African guy to a majority shareholder. So they are still with us.


EEA directives?

A.2: No, they all needed the business.



A.2: Well it has deteriorated and I am not happy about it. Nevertheless, it has to

come right. We were discussing the problem at a manage meeting about two

weeks ago. So it’s in the upper managements’ hands now. The computer

guy is very good though. We had a white owned company before, just as

good, so we have suffered no losses there.


A.2: On reflection, yes.


166

A.2: We are an international company, so the answer is yes, its good for

business, we are seen to be very pro-active in employee upliftment. The

EEA also has a major factor on our internal management programme as

well.


freedom of choice?

A.2: A definite yes to that one, but I do believe that opportunity has to be given

to those people who were previously disadvantaged. Problem is finding

those people who have the experience and qualifications. A lot do not have

the right equipment. The company does its best in helping the right

contractor who shows keenness and ability.

Interviewer: To digress a little, do you feel that racism has increased in the workplace,

many white business owners, and even whites feel there is reverse

discrimination now?

A.2: I think there is a lot more tolerance now. There is more teamwork, co-

operation and communication. Racism is no longer tolerated in the

workplace and can constitute dismissals. People are aware of that and jobs

as well as contracts are not so easy to come by. Reverse discrimination has

reared its head amongst white employees and white business owners, they

will have to learn to adapt and handle it. We had to for many years; it’s a

fact of life, but a poor excuse in many instances.


changed?

167

A.2: Yes it has, I have given you an instance where the company has lost

production unnecessarily because we lost the right person for the job. That

is viewed as a management problem, not one blamed on the EEA. My

personal opinion may differ.


the EEA?

A.2: Ishh, that is a loaded question. Lost production and a falling behind of

delivery schedules can cost this company dearly. Exchange rates for our

exports are at a fixed dollar rate, but we pay demurrage and those penalties

can adversely affect our profits. But no, we haven’t lost any contracts yet.

Interviewer: Do you know of any businesses that have ceased or about to cease trading,

or downsized because of the implications the EEA had on them?

A.2: No, not that I know of, only the one I told you about.


well?

A.2: I have heard of some doing well, but I couldn’t tell you their names.

Interviewer: Are they from that group described as previously disadvantaged?

A.2: If you mean, “Are they Black?” - Yes they are.

Interviewer: Thank you for your time and patience.

A.2: A pleasure.

168


The third interviewee is the Chief Engineering Manager (A.3) responsible for

employing contractors on site for plant and equipment maintenance and repair. The

company has extensive heavy plant machinery, smelting and foundry operations

characteristic of an open mining operation. The name of the company is referred to

under the pseudonym MTZ. The interviewee is a White male of around forty-three

years. Confidentiality of the interviewee’s identity is assured.



A.3: Yes it is.

Interviewer: Before the EEA was your business concern active in applying the principles


A.3: MTZ has been an Equal Opportunity Employer well before the introduction

of Affirmative Action and the Employment Equity Act.

Interviewer: Does that mean that MTZ has been using contractors from the previously

disadvantaged groups well before the EEA as well?

A.3: Of course. MTZ had programmes in place to train maintenance personnel

way back in the early 90’s. The view was to eventually set these people up

to become contractors to the company. Today the concept has been very

successful.

Interviewer: Does your business concern apply the principles of preference to designated

SMEs as per the EEA?

169

A.3: Yes, any contractor who needs to be either a supplier of goods or services

needs to have a previously disadvantaged person in a high management

position or as a partner. We do allow a little flexibility, which I must admit

does benefit our selves by not ‘cutting off our nose to spite our face’. By

that, I mean we do not ask the contractor to have a Black majority partner or

shareholder. On the other hand we are wide awake to those who try to pull

the wool over our eyes by window dressing.


EEA?

A.3: No, all the SMEs that have been with us, even those before EEA and AA

[Affirmative Action] had to get past stringent requirements required by the

company. Two international mining companies jointly own us and our site

contractors have to conform to strict government regulations. Those

regulations applied are also those applied to our overseas parents as well.

We often deploy our contractors to our overseas operations so you can

understand why we are so strict. Oh, we did lose one contractor whose

business closed after he was killed in a motor accident.

Interviewer: You must be with the company for some years now?

A.3: I came here as an apprentice in 1982, and I have been in the Engineering

Section ever since.

Interviewer: This contractor who you lost, was his management principles in line with

today’s EEA requirements?

A.3: Yes, he had African and Coloured guys in positions managing key

maintenance operations on site.

170

Interviewer: And was he a White guy?

A.3: Yes.


A.3: On my side I have six SMEs. They look after foundry, smelting, heavy

motor plant, electrical, separation and conveyer machinery.


A.3: Off hand, no. However, I would say there is a good mix of all races amongst

them.

Interviewer: Have you declined business to any SME that does not fall in line with the

EEA principles?

A.3: Yes.


EEA directives?

A.3: No, mainly because our conditions have always been in place to do business

with those people who fit our mission statement objectives.



A.3: Excellent, no problems whatsoever.


A.3: No, I feel it was through great management forethought and planning for

the inevitable.


171

A.3: In principle?…… yes, and its introduction has not affected our business as

it has others.

Interviewer: Please explain.

A.3: We had the forethought to prepare our future contractors before it would be

enforced upon us. The period for other companies to change is too short to

benefit through experience and knowledge that comes with engaging the

right people. We mentored disadvantaged groups long before it was

enforced upon us to apply EEA principles. It has given us competitive

advantage too.


freedom of choice?

A.3: The principles of the EEA do compromise freedom of choice, but I feel the

company has handled the situation to its advantage as I have said.



discrimination now?

A.3: In our workplace we have always had a great interracial harmony present,

the company has never tolerated racialism of any kind. But there again I can

understand some racial disharmony within other companies who have put

whites out of work.


changed?

172

A.3: MTZ has increased profitability and efficiency year on year, our profits are

based on dollar exports.


the EEA?

A.3: No.



A.3: Yes.


well?

A.3: Plenty.


A.3: No, they African, Indian, Coloured or White/Black owners..

Interviewer: I would like to thank you for the time and information you have given me.

Your contribution has been extremely valuable.

A.3: Anytime…. Only a pleasure. Thank you.

173


The fourth interviewee is a General Manager (A.4) responsible for using

contractors on site for plant and equipment maintenance and repair. The company

is highly automated and their employee compliment in house is relatively small

compared with the size and scope of their operation. The name of the company is

referred to under the pseudonym SCENT. The interviewee is a White male of

around forty-seven years. Confidentiality of the interviewee’s identity is assured.

The interview was conducted over the phone. Irrelevant formalities before the

actual interview discussion over the phone have been excluded.



A.4: Yes, we are a subsidiary of a large South African company.



A.4: Yes it was, we have several African board members who implemented AA

principles.



A.4: Yes it does.


EEA?

A.4: Ceased trading?

174

Interviewer: Yes.

A.4: Only one that I know of. It was an electrical contractor who looked after our

plant. He was put in a position where he had to comply with the EEA by

another major governmental concern. He decided it was not worth the risk

and decided to close up shop and emigrate. I know of another, but he didn’t

trade with us. He had a building-contracting firm.

Interviewer: Were these SMEs from previously disadvantaged groups?

A.4: Both were white owners, the building contractor had an African partner

with 51 percent holding but that went to the wall.


A.4: There is an electrical contractor, one that does boiler maintenance and a

packing machine contractor – three.


A.4: The boiler contractor is a coloured guy and has about six guys with him.

The electrical guy is White and has an African partner. The packing

machine chap is an Indian, a real whiz with the programming; he has about

ten guys who do maintenance for quite a few companies at once. He is a

specialist and does all the set up for the machinery himself.


EEA principles?

A.4: No, the situation has not arisen. When we have been approached, our

response has been that we have no need for any more contractors.

175


EEA directives?

A.4: No, the electrical contractor I told you about just went out of business,

unfortunately.

Interviewer: So he has now ceased trading altogether?

A.4: I believe so.



A.4: No problem, we are very happy with them.


A.4: I don’t think it really affects our business, but as far as the EEA goes, the

company is seen to conform to its requirements.


freedom of choice?

A.4: Any directive that affects choosing the best person for the job that gives

priority to a disadvantaged group must affect freedom of choice, yes. The

main problem is keeping management directives and management

accountabilities balanced, it’s not easy.



discrimination now?

176

A.4: In our workplace I would say that there is no racism evident. Having only

fifty or so employees on site, we are a pretty close community and we all

get on very well. I have heard of the reverse discrimination that has been

voiced by white contractors and business people, but they will have to

adjust and adapt.


changed?

A.4: Since the EEA came into effect?

Interviewer: Yes.

A.4: For us nothing has changed for the worse. Our business is booming and we

are actually looking at a management buy-out soon.


the EEA?

A.4: No.



A.4: Only the ones I told you about earlier.


well?

A.4: Yes, lots of them.


A.4: No, they all have a major Black involvement in their business.

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Interviewer: Well that’s all the questions I have. Thank you for your time. Keep well.

A.4: You’re welcome, bye.

Interviewer: Bye.


The fifth interviewee is a Fleet Manager (A.5) responsible for using service

contractors for the maintenance and servicing of their fleet of vehicles. The

company is highly automated and their employees are qualified technicians used to

install, maintain and service that equipment. The company is very dependent on

vehicles to carry out its operations. The name of the company is referred to using

the pseudonym SET. It is a parastatal, soon to be privatised. The interviewee is an

Indian male of around thirty-six years. Confidentiality of the interviewee’s identity

is assured.



A.5: It most certainly is, we are still a government concern.

Interviewer: Before the EEA was SET active in applying the principles of Affirmative

Action?

A.5: Yes it was. However, it was drastically applied to our own employee

compliment. Those who supplied services to SET had to comply with the

EEA from 1998 on.

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A.5: Very much so.


EEA?

A.5: Yes, mainly White owned contractors who did not empower Blacks in their

business into higher management or majority partnerships.

Interviewer: So those SMEs were not from previously disadvantaged groups?

A.5: No.


A.5: In my region, about thirty-four.


A.5: Whew… not really, but they are all designated according to the EEA, even

though most have less than the fifty employee threshold.


EEA principles?

A.5: My department is approached all the time by prospective businesses looking

for work. They have to present a proposal, if they do not conform to the

EEA, then they are not considered.


EEA directives?

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A.5: Not that I know of. We have just reduced or eliminated work allocation to

them.

Interviewer: Have they now ceased trading altogether?

A.5: I don’t know the answer to that one



A.5: Servicing and maintenance of motor vehicles has always been a quality and

service hassle. One thing I must say is that we have lost some really

excellent service providers because they were not Black.

Interviewer: By your use of the term Black, are you including all the race groups other

than White?

A.5: Yes.


A.5: Of course.


A.5: Yes, internally we are uplifting previously disadvantaged people. We are

applying it to our service providers, so we are viewed as being consistent.

We are doing phenomenal new business in disadvantaged areas. I feel those

people see SET as a business they can identify with by having a majority of

previously disadvantaged staff in highly skilled positions.


freedom of choice?

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A.5: I suppose it must do really. There are some really clever and experienced

service providers out there who are White. It will take quite a while for the

Black ones to achieve the expertise and knowledge that many of the White

suppliers have. But the EEA requires us to only take on designated

suppliers.



discrimination now?

A.5: In our workplace I would say there has been an increase in racism.

However, by that I mean discrimination of sorts. African males are moving

fast into upper management positions, along with some African females.

This is not going down well with the remainder of staff. There have been a

lot of retrenchments or releasing of staff and it has not been the African

staff.

Interviewer: And your suppliers?

A.5: Oh there have been rumblings of reverse discrimination from our past

White suppliers. Same can be said of the White internal staff as well.


changed?

A.5: I am not sure about the profitability, but efficiency has taken a drop. We

wait longer to get our vehicles back from service and repairs. We also have

more breakdowns than in the past. So, yes, efficiency must have dropped. I

suppose profits must be affected adversely because the vehicles are not out

there earning money.

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the EEA?

A.5: Being a monopoly, no. But when we start to get competition it might be a

different matter.



A.5: As I said previously I don’t know of any that have ceased trading, but I do

know of some that have ‘downsized’ as you put it.

Interviewer: Were they White businesses?

A.5: Yes, but I know of a few Indian and African businesses as well.


well?

A.5: Yes, especially those contractors who are now doing line installation.

Interviewer: Are they designated?

A.5: Yes.

Interviewer: Thank you for taking time out to see me and helping me with my research.

A.5: Only a pleasure.

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The sixth interviewee is Chief Engineering Manager (A.6) responsible for using

contractors on site for ship and equipment maintenance and repair. This private

company is contractor intensive. The name of the company is referred to under the

pseudonym WELD. The interviewee is a White male of around forty-three years.

Confidentiality of the interviewee’s identity is assured.



A.6: Yes it is.



A.6: No.



A.6: Amongst our customers, many whom are international, we have the Port

Authority. They are a major client for us and we have to conform to the

EEA in order to carry on business with them. In turn, this means we have to

impose the requirements of the EEA on the contractors we take on to do our

work.


EEA?

A.6: In this business contractors come and go. But those who have been with us

for many years are made up of people from all different cultures and race.

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This is a very lucrative business for our contractors. Those who were White

owned have adapted to keep their business, if you understand what I mean?

As to whether any have ceased trading, no, I can’t think of any, except one

or two who have now retired.


A.6: We have boilermakers, coded welders, millwrights, capstan lathe turners,

fitters, electricians, engineers, technicians, …… at any one time I reckon we

have about fifteen contractor teams operating.


A.6: Gee, heaven no. It’s the rainbow nation out there now.


EEA principles?

A.6: Mmmm, not as such. On government work, we have to be careful and make

sure we are seen to conform by the contractors we supply. Our company has

two White, three Indian and two Black board members. It used to be a

family concern but was made a public company some years back. Those

SMEs who are recognised as the best in their field who are taken on by us.

If they are not designated as the EEA says then we use them for our non-

governmental contracts, being foreign vessel owners.


EEA directives?

A.6: Never happened as far as I far as I know.

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A.6: We take on the best contractors in the field. We let those designated

contractors who are the best in their field, work on the governmental work.

We use that sector as our training section [he shows a slight grin and smirk

as he looks sideways at the researcher]. Fortunately WELD has the

reputation and size to command its presence in the workplace.

Interviewer: Do you feel the EEA has put you into this position of adaptation?

A.6: We are a thriving business. We use all the business tools and ways to get

what we want out of it and to maintain and improve customer satisfaction.


A.6: If it keeps us in work, or gets us extra work, then yes.


freedom of choice?

A.6: In theory I can understand that it would affect freedom of choice. For us, I

feel we have the freedom, as you put it, to engineer – forgive the pun –

things in our favour.



discrimination now?

A.6: Oh there has always been racism in the workplace, as to whether it has

gotten worse or better, don’t really know. But I feel that there is less tension

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now that pay is equal and so are all people’s rights. As for the Whites, they

will have to lump it or leave it. It’s the times we live in, life goes on.


changed?

A.6: Yep, our company has never been stronger. Our management abilities have

seen to that. I don’t think it has anything to do with the EEA.


the EEA?

A.6: No, definitely not.



A.6: Yes quite a few. Probably their own fault. If you need the bucks then you

have to adapt. Whether you duck and dive or keep your hands on the table,

the best businessman wins.


well?

A.6: Yes sure, all our contractors!

Interviewer: Are they White owned SMEs ?

A.6: Of course not! [smirking].

Interviewer: Great talking to you, thanks you for your time out.

A.6: Only a pleasure.

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The seventh and final interviewee is Account Executive (A.7) responsible for using

SMEs for vehicle servicing, maintenance and repair. The company is a government

owned body in the process of eventual privatisation. Their employee compliment in

house is very high. The name of the company is referred to under the pseudonym

ZOOM. The interviewee is a White female of around fifty years. Confidentiality of

the interviewee’s identity is assured.

Interviewer: Is ZOOM a designated employer as prescribed by the Employment Equity

Act?

A.7: Yes.

Interviewer: Before the EEA, was your business concern active in applying the principles


A.7: Yes.



A.7: Yes.


EEA?

A.7: Yes there are some.

Interviewer: Were these SMEs from previously disadvantaged groups?

A.7: Yes and one was White owned.


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A.7: There are five SMEs, but we do deal with the main vehicle dealerships as

well because of warranty claims.


A.7: Three Indian Panel beaters, one designated garage, and one White owned

vehicle maintenance facility. The one White business has been retained

because the services and quality supplied are, believe you me, unsurpassed

in South Africa. We would be foolish to decline him our business.

Interviewer: That’s interesting. Why?

A.7: Well he is not South African and his expertise is so beneficial financially

and safety-wise we have battled to find a replacement. He has an African

worker who works with him who has learned all his skills and as far as I am

concerned, he meets the objectives of the EEA. He has trained and

increased the knowledge of our drivers in the accountability of looking after

ZOOM’s assets, that being ZOOM’s vehicles.


EEA principles?

A.7: Yes.


EEA directives?

A.7: Not that I know of.



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A.7: ZOOM’s policy of employing the services we require from previously

disadvantaged groups has affected my panel beating side. I have been

directed to use these SMEs, regardless of my opinions on their quality of

work and service. Some of the paint finishes and body repairs are terrible.

And by then the vehicle has to be repaired or resprayed all over again,

leading to more vehicle downtime and added costs. They are still paid for

the work. The same goes for the designated repairer, but then the quality of

vehicle repairs has always been a cause of disagreement.


A.7: Yes, because my judgement and advice is overruled by it.


A.7: For our business in general? Yes, because it is increasing the skills base for

the majority of the population.


freedom of choice?

A.7: For me, yes, for reasons I have already pointed out.



discrimination now?

A.7: For me as a White woman it has always been hard, but I feel there has been

an increase in racism from African management levels. But there again it

may well be because I am a woman. I have seen a vast reduction in the

White male compliment within ZOOM. Whether that is rooted in racism, I

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do not know and cannot say. Whites within ZOOM have given strong

indications that they have been victimised because they are White. But it’s

hard to prove. Racism is dismissible if proven.


changed?

A.7: It has to be and for the worse, a lot of expertise and knowledge gained over

many years has been lost.


the EEA?

A.7: I have no idea. I doubt it though. I have heard many complaints from

customers of ZOOM’s, but we have a monopoly, so, too bad for them I

suppose.



A.7: Personally, I know of a few.


well?

A.7: Yes, especially those who are well managed and experienced.


A.7: Some are.

Interviewer: Thank you. I am very grateful for the input you have given me for my

research.

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APPENDIX IV:

EXTRACT OF THE FINDINGS BY THE SOUTHERN

AFRICAN MIGRATION PROJECT, SERIES 18

The following provides a point of reference for determining the economic value of skilled

people working in South Africa. The Southern African Migration Project seeks to

determine the qualitative loss of these skilled people should they decide to emigrate from

South Africa. The effects of the EEA on White SMEs, as determined by this dissertation,

can be viewed as contributory to their desire to leave.

The findings of the Project are as follows:

1. The economically active population in South Africa is approximately 17,000,000. using various criteria, the size of South Africa’s skilled sector is defined at 1,600,000 (or 9% of the economically active population). Given the role of apartheid in reserving important positions in the economy for Whites, it is no surprise that the random sample was predominantly White (72%). Of the remainder, 18% were African, 8% Coloured and 3% Indian.

2. The pool of skilled South Africans who might conceivably leave is a large one.

Over two-thirds (69%) say they have given the idea of emigration some thought (and 38% say they have given it a “great deal” of thought). There is a perception that the brain drain is a “White phenomenon” only. This is misleading: 69% of Whites and 68% of Blacks have given emigration some thought.

3. Thinking about leaving, and actually doing so, are not the same thing. Only

20% say that it is very likely that they would leave for a period of more than two years. Slightly higher proportions of skilled Whites (22%) than Blacks (15%) say that a permanent move is very likely. On the other hand, skilled Blacks are more likely to leave South Africa on a temporary basis (15%) than Whites (10%).

4. Specifying a time frame dramatically cuts the levels of potential emigration.

Only 3% said that it was “quite likely” that they would leave within six months, 5% say they will leave in the next two years, and 13% say it is “very likely”

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that they will leave within five years. The proportions of skilled Blacks and Whites who express a strong probability of leaving within six months or within two years are statistically the same (though whites are more likely to express a strong probability of leaving within a five year time period).

5. The firmest indicator of a person’s emigration potential is whether they have

actually begun the process of application for emigration documentation. Some 6% say they have applied for work permits in another country, 5% have applied for permanent residence elsewhere, and 3 % had applied for foreign citizenship. Again, there are no statistically significant differences between skilled white and Black South Africans.

6. A composite statistical index was used to summarise ach person’s potential to

emigrate. Around 2% of the sample falls into the “very high” category of emigration potential (of leaving South Africa for a period of two years or more, within the next two to five years). Some 10% have a “high” emigration potential and 25% have a “moderate” emigration potential. Only 20% have no emigration potential.

7. There is absolutely no difference in the proportion of skilled Whites and

Blacks who fall into the “very high” category (2% of either group). A higher proportion of skilled Whites (11%) than skilled Blacks (4%) fall into the “high” probability category. But adding the two together, the difference in proportions of skilled whites (13%) than skilled Blacks (6%) with a high/very high probability of leaving the country within the next five years, is not nearly as great as might be expected.

8. If only those with “very high” emigration potential left the country in the next

five years, this would translate into a potential gross loss of around 32,000 skilled people. If those with a high potential are added, the number could jump to 192,000.

9. The United States (24%), Australia (24%), United Kingdom (15%), New

Zealand (12%) and Canada (11%) rank as the five most often mentioned destinations.

10. Skilled South Africans were asked about their satisfaction with a wide variety

of measures of “quality life.” There are high levels of dissatisfaction with (a) the cost of living, (b) levels of taxation, (c) safety and security, and (d) the standard of public and commercial services. With the exception of standard of services, dissatisfaction extends across racial boundaries and is not a predominantly White pre-occupation. They are far less dissatisfied with personal economic conditions as well as with schools and available health care. The single exception is Black dissatisfaction with current income levels.

[Researchers note here is that income levels may now be affected because of the EEA depriving a good income from jobs previously held by Whites or Whites which are now unemployed because of the EEA].

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11. We see far higher levels of relative dissatisfaction among skilled Whites when we asked them to compare their lives today versus five years ago. Some 65% of skilled whites say their lives got worse in the previous five years. In stark contrast, 65% of skilled Blacks say it got better. But all skilled South Africans tend to feel that life will only get worse. Skilled South Africans are particularly pessimistic about their future cost of living, levels of taxation and safety, and the standard of public services. Again this pessimism extends across the racial divide.

12. The major difference between White and Black skilled South Africans is in

political attitudes. Skilled Whites are highly dissatisfied with government performance, feel that it does not represent them and distrust government. Skilled Blacks have far less pessimistic views. Skilled Whites are widely opposed to affirmative action (83%) while only 20% of skilled Blacks are opposed.

13. Those with high emigration potential were asked what, if anything, would lead

them to stay in South Africa. Only 12% said that there was “nothing” that could make them stay. One quarter (25%) said improvements in safety and security would make them stay.

14. Finally, would government steps to restrict emigration make them more or less

likely to leave? Such policies would be counter-productive and hasten the exit of almost half of the high emigration potential group. Specific steps such as requiring a year’s national service from students leaving professional schools, and end to dual passport holding, or increased fees for documents would actually hasten the exit of between one-third to one quarter of this group.

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APPENDIX V

EXTRACTS FROM THE MOST RECENT SAMP REPORTS

V.1 SKILLS FLIGHT CHALLENGES GOVERNMENT (CAPE

TOWN, DISPATCH ONLINE, 30/10)

The public service was experiencing "serious challenges" in retaining skilled professionals, with computer experts, health professionals and engineers in short-supply, Public Service Minister Geraldine Fraser-Moleketi said yesterday. "We need sober minds to develop remedial steps -- which is why we've decided on targeted interventions," she told MPs during a special debate requested by the New National Party requested on the "brain drain". Health professionals, in particular, would require focused attention and that department was considering interventions. "It is also addressing the question of poaching of health professionals by developed countries. "The United Kingdom and the United States increasingly rely on foreign health workers to satisfy their internal demand." Some success had been achieved in reversing this tendency, Fraser-Moleketi said. All the Commonwealth countries had accepted a code on the recruitment of health professionals from member states, and the challenge was to extend this to other countries through the World Health Organisation. Fraser-Moleketi pledged to do her utmost to create conditions favourable to the recruitment and retention of professionals in the public service. However, she noted that skills mobility was not a phenomenon peculiar to South Africa, and said there was an increasing skills flow between different nations. Figures for the first five months of 2002 showed that the total number of economically active persons who emigrated from South Africa was up by 18,4 percent, Fraser-Moleketi said. However, what the statistics did not say, was how many South Africans had left permanently. "Those who leave often return with enhanced skills and hard currency. This is ploughed back into the economy through entrepreneurial activity and investment." In his speech, NNP leader in Parliament Dr Boy Geldenhuys said it was not only English-speaking white South Africans, but black people and Afrikaners who were also leaving the country in droves. An emigration agency indicated that 60 percent of all inquiries were from black people. Emigration was a serious problem, with devastating consequences for the economy. In 2001, 884 managers, 358 engineers, 353 teachers, 286 artisans and 1848 students immigrated to other countries. Fifty percent of all community doctors currently working overseas were not coming back. Twenty-six percent of doctors who graduated between 1990 and 1999 had left the country, and about 5000 doctors who were trained in South Africa were living abroad. Three hundred nurses were leaving the country on a monthly basis. It can now be accepted that 12-14 percent of all South Africans with a tertiary education were living abroad, he said. On a solution, Geldenhuys said: "A lower crime rate, a sunset clause for affirmative action, flexible labour laws, improved working conditions and competitive remuneration packages may do the trick."

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The DA's Mike Ellis said the brain-drain problem was compounded by the effect of HIV and Aids on the skilled workforce aged between 30 to 40. "Our ability to replace those leaving is also disappearing," Ellis said. The government itself did little to encourage its own professionals in the public sector to stay, he said. Nurses and teachers were leaving for far better deals overseas. There could be no doubt that one of the reasons behind many professionals leaving South Africa was the way the government had implemented affirmative action, Ellis said. The DA supported affirmative action, but too often the way it was implemented had led to highly-qualified, skilled people leaving, as there was little alternative in a country where the number of jobs become fewer to sell their services elsewhere," he said. His concerns were echoed by the Freedom Front's Dr Pieter Mulder who urged the government to introduce special measures to assist those who were negatively affected by affirmative action.

V.2 SA'S BRAIN DRAIN UNDER SPOTLIGHT IN PARLIAMENT

(SABC NEWS, 30/10)

South Africa's brain drain has come under the spotlight in Parliament. Despite the ongoing loss of skilled people there are signs that young people were coming back in the wake of the collapse of Information Technology industries abroad. South Africa has been losing thousands of skilled people to other countries. They include nurses, doctors, teachers, managers, and technicians. Government said the skills flow between countries is a global phenomenon and that initiatives have been launched to retain valuable skills. Geraldine Fraser-Moleketi, the Public Service Minister, said: "I want to make that call today on behalf of the government that 'come back on short term contract. Come back and help build capacity in government'." Some opposition parties cited crime, poor working conditions and the implementation of Affirmative Action as factors contributing to the brain drain. Mike Ellis, a Democratic Alliance (DA) representative said: "The DA has always supported Affirmative Action. Yet too often the way it has been implemented has led to many qualified skilled people having to realise that their talents are no longer required and they'll receive no promotion." Although many cited varying statistics, all agreed that the problem is denting South Africa's economic performance.

V.3 MPS TO DEBATE BRAIN DRAIN (PARLIAMENT, SAPA, 22/10)

National Assembly Speaker Dr Frene Ginwala had agreed to a special parliamentary debate on South Africa's brain drain as a matter of public importance, the New National Party said on Tuesday. News from an IT recruitment company that the stream of IT professionals was not only one way out of South Africa, but that some "brains" were returning with enhanced skills was good news, NNP spokeswoman Sheila Camerer said.

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Unsurprisingly, one of the reasons given by returning South Africans was the good weather, she said. "Unfortunately, the statistical picture indicates that generally there is exponential growth in the brain drain out of South Africa during the past few years. "This is a matter of enormous concern and we believe Government should get the full picture and if necessary do something about turning the brain drain around." It was for this reason the NNP had asked for a special debate on the issue, Camerer said. "The steady loss of skills has serious consequences for the economy of our country. The reversal of the brain drain should not just be left to the weather." Government should get to grips with the problem and consider how to ensure that the majority of young professionals wanted to remain in or at least return to South Africa, she said. A date for the debate has yet to be set.

V.4 IT PROFESSIONALS RETURN TO SA (BUSINESS DAY, 22/10)

An information technology (IT) recruitment company said yesterday reports of a "brain drain" of professionals out of the country often ignored the numbers returning to SA, with mostly enhanced skills. The reports said more than 7400 SA graduates and professionals left for greener pastures during the first half of the year apparently exacerbating the country's brain drain. "It is true to say that a lot of people are leaving the country to live and work in various countries overseas," said Org Geldenhuys, a director at a Pretoria-based IT recruitment company. "But we are also noticing that a lot of people are coming back as well and are bringing enhanced skills back with them. "We can, of course, only talk about the IT industry as this is our field. But during the past 12 months we have assisted a growing number of IT workers to find employment in SA," Geldenhuys said. He said that many South Africans went overseas with the intention of making it their new home, but realised that the grass was not really that green. "We have worked, for instance, with a number of people with SAP software skills who have gone overseas and have gained greater experience in the SAP field and are now returning. This is a boon to the local IT market," Geldenhuys said. "Interestingly enough, one of the factors cited by those returning is that they miss the SA weather. There are other factors, of course, including the fact that the economies of other countries, and the opportunities, are not as rosy as originally anticipated. "In addition, other countries have their own problems, including political and social turmoil. "But, whatever the statistics are, we are seeing a steady stream especially lately of South Africans returning to local soil," Geldenhuys said.

V.5 IMMIGRATION ACT MISSES MARK ON SKILLED LABOUR

(BUSINESS DAY, 03/10)

The passing of the new Immigration Act, which replaces the apartheid era Aliens Control Act, should have been greeted with relief. Instead, the response among those concerned with economic growth has been dismay, disbelief and confusion. The bizarre parliamentary process that produced this act reflected deep contradictions among legislators and others about economic growth requirements, the legitimacy of business concerns and non-racism.

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It also revealed some barely disguised xenophobia and a failure to appreciate government capacity is an impediment to governance and development. The new act means that skilled immigration will continue to be difficult and slow. This is mainly because the act requires home affairs to consult extensively with other departments labour, trade and industry in creating an elaborate set of quota and skills certification requirements, and then to enforce these complicated rules. These requirements are supposed to ensure no South African will lose a job to a skilled immigrant. This is a huge, impossible and wasteful task. Employers almost never prefer a skilled immigrant to an equivalently skilled South African as the total cost of employing an SA citizen will probably be lower. Skilled immigrants can create jobs. In modern economies formal qualifications now bear very little relationship to what work people end up doing. Why waste time trying to forecast our needs on the basis of inaccurate and out of date information when the country is desperate for the skills to run development projects, start new businesses, manage large enterprises and train South Africans? Slow, pointless bureaucratic procedures that have prevented foreigners from bringing their knowledge and energy to SA in the past will not be alleviated and in some respects are likely to be reinforced. SA has two closely linked skills shortages. One is a shortage of productive skills and practical competencies, and the other is a shortage of people who are employable, self-employable or readily trainable by employers in a knowledge, technology and technique-based economy. These shortages have now been compounded by two new negative dynamics emigration and AIDS. There are only two solutions available. One is a dramatic upgrading of our educational and training systems. This is vital, but the bold reforms required to equip large numbers of South Africans with the skills our economy needs will take years to implement. The only short-term policy option is an open door, market-driven immigration policy coupled with aggressive recruitment of skilled people. This approach is an essential ingredient in the success of the longer-term education and training option that will create more home-grown skills, as we desperately need foreign teachers in our educational institutions. The view that skilled immigrants prevent South Africans from finding jobs should be emphatically rejected. The opposite is true. Researchers estimate that every skilled professional, directly or indirectly generates numerous unskilled jobs. Foreign entrepreneurs create new wealth and taxes. Each new skilled immigrant will create jobs for South Africans simply by going about their business, buying goods and services and paying tax. Ultimately, SA will need a bold new immigration act that creates an open door for skilled people and entrepreneurs. Capital criteria for business permits should reflect the reality that entrepreneurs come in many sizes from large multimillion Rand investors to the smallest entrepreneur with just enough to start a family business. In the short term, regulations to the current act should go as far as they can to "open the door". The act's reliance on a quota system will not make this easy. Nevertheless, correctly framed regulations could go a long way to reduce the damage. The guiding principle of the regulations should be to allow entry to any person whose skills, aptitudes, experience (lifelong learning) and previous occupations show that they will be able to earn a living in the private sector, pay taxes and consume commercial goods and services. If this principle is followed, the regulations will serve the national interest in economic growth and job creation. Equally, in the very unlikely event that too many people, or the wrong kinds of

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people, are allowed in, regulations guided by this principle could be rapidly altered to deal with the problem. How far the as yet unknown regulations will be able to meet SA's needs remains to be seen. In the end, however, SA needs a bold new immigration act that really does create an open door for skilled people and entrepreneurs. Meantime, subject to the less than ideal legal framework created by the act, immigration regulations should go as far as possible to create conditions for growth and investment by a very large inflow of skilled and entrepreneurial migrants. The new act reflects considerable ambiguity and confusion in the ruling party about the importance of skilled immigration. This is despite President Thabo Mbeki's commitment in February last year to review immigration laws to "enable us to attract skills into our country". An important opportunity has been fumbled. It reflects a failure of leadership by the president, cabinet and the African National Congress on an important national issue. SA is not short of job seekers. We are short of taxpayers, people who need no support from the state and people who can create jobs for others. Our immigration regulations and ultimately our legislation should reflect this reality. Bernstein is Executive Director of the Centre for Development and Enterprise. This article is based on a recent centre report that SA's new immigration Act is salvageable.

APPENDIX VI

THE ECONOMIC CONTRIBUTION OF SMES –

EXTRACTS FROM THE NATIONAL TREASURY

REVIEW 2002

4.2 Gross value added by SMEs Given the lack of reliable data, estimating the value added by SMEs is a hazardous statistical process. Short of a systematic process of value-added calculation, any methodology is confined to an indirect approximation of SMEs’ share of GDP based on a set of assumptions. In what follows, use was made of the aforementioned employment data, for various types of enterprise, to apportion the remuneration component of GDP across firms. The non-wage GDP, generally known as the ‘gross operating surplus’ is then divided among various enterprise categories by making two sets of assumptions about the relative profitability of enterprise types. For example, it is assumed that a ‘survivalist firm’ generates no gross operating surplus. Likewise, micro firms are assumed to have ‘near-zero’ gross operating surpluses. Using this two-step procedure, indicative estimates were generated for the GDP share of large firms and all other categories of firms. Clearly, this is a crude statistical procedure, which, at best, establishes a very broad order of magnitude for the contribution to GDP by these various types of firm. The choice of the ‘year’ is dictated by the availability of all relevant data for the period under consideration; 1997 was the only year for which employment by categories of firms, as well as the other statistical components, could be collected. As the estimates in Table 6 illustrates, the share of ‘large firms’ in South Africa varied between 43 and 48 percent of GDP in 1997. It is noteworthy that these results differ significantly from those obtained by the Bureau for Economic and Policy Analysis (BEPA) for Ntsika in 2000, who came to a conclusion that large enterprises contributed more than 65 percent to GDP. Further research is required to explain these types of differences in underlying data. The contribution of SMEs to GDP, then, is dependent on the definition used. For example, if ‘survivalist and micro firms’ were excluded, the SMEs’ value added would amount to 39 to 42 percent of GDP in 1997. However, if all ‘non-large enterprises’ were included, the SMEs share in GDP would vary between 52 to 57 percent.22

22 Compared to developed countries; this is not a very high result. For example, in France it is estimated that very small and small enterprises (defined as enterprises with fewer than 10 and 50

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employees respectively) account for 32 per cent and 24 per cent of GDP respectively. In total the French have 55 per cent compared to South Africa’s 37 per cent for those same categories. Source: B. Duchéneaut, Enquête sur les PME françaises, 1993.

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The actual share that SMEs have in GDP is obviously sensitive to the assumptions made and the definitions used. The statistical approximations, however, demonstrate clearly the material significance of SMEs in the South African economy. In many ways, SMEs constitute the backbone of the economy, with all the obvious consequences for employment. Table 6: Contribution to total gross value added by types of enterprises (1997)

Type of enterprise

Value added Survivalist

Micro Very small Small Medium Large

GVA 1 in million R

7 622 81 572 58 061 106 153 93 076 269

312

GVA 2 in million R

7 622 67 721 58 061 92 302 93 076 297

015

GVA 1: % of

GDP

1,24 13,25 9,43 17,24 15,11 43,73

GVA 2: % of

GDP

1,24 11,00 9,43 14,99 15,11 48,23

Notes on methodology, assumptions and sources of data: i. Total gross value added in 1997 was R615 799 million. ii. Total gross value added: compensation of employees was R338 776 million. iii. Total gross value added: gross operating surplus was R277 023 million. iv. GVA 1 was calculated in two steps: Total compensation of employees in the economy was allocated to the different types of enterprises using, as weights, employment per type of enterprise as a fraction of total employment. The second step was to allocate gross operating surplus to each type of enterprise using the following weights: survivalist 0,0; micro 0,05; very small 0,05; small 0,20; medium 0,20 and large 0,50. v. For GVA 2, the same methodology as above was used in the step 1 calculations. vi. For GVA 2, the step 2 weights were: survivalist 0,0; micro 0,0; very small 0,05; small 0,15; medium 0,20 and large 0,60. vii. The second half of the table shows the gross value added by each type of enterprise, for the two different calculations of gross operating surplus, expressed as a percentage of overall gross domestic product of the economy. Sources: Ntsika, State of small business in South Africa, 1999; SARB Quarterly Bulletins; and Stats SA Releases.

4.3 SME employment Table 7 below summarises the latest official survey of employment statistics in South Africa. In terms of the breakdown between large-scale enterprises and SMEs, the data highlight the relative significance of SMEs in the national context.

Table 7: Employment and unemployment in South Africa 1997

No of jobs

% of economically active population

% of jobs

Employment in large-scale firms

3 097 000 25% 39%

Employment in formal SMEs

3 135 000 25% 39%

Employment in informal sector

1 052 000 8% 13%

Employment in domestic service

788 000 6% 10%

Total employed

8 072 000 64% 100%

Total unemployed

4 551 000 36%

Economically active (extended

definition)

12 623 000 100%

Population aged 15-65 years

22 818 000 -

Sources: CSS (1998), Employment and Unemployment in South Africa 1994-1997, CSS, Pretoria; and Ntsika, Op. cit., 1999. It is common knowledge that these statistics are subject to some uncertainty. Definitions are again critical in this regard. For example, Ntsika (1999) provides alternative figures indicating an employment share of 43 percent for ‘large-scale firms’, but does not include employment in domestic services. If the latter figures are added to the total, the share of large-scale firms in national employment diminishes to about 38,6 percent of total employment in 1997. This figure is very close to the share of large firms in job creation as shown in Table 7 above. Based on these projections, the share of SMEs in national job creation may be estimated to be at about 62 percent.23

23 This figure is very much in line with the OECD countries. See OECD, Op. cit. 1999, p.5.

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As important, over the past few years, is that the trends in large enterprises have been toward unbundling, outsourcing and downsizing, all of which have diminished their share of national employment. At the same time, these efficiency and technology-driven process re-engineering initiatives have increased the relative significance of SMEs in job creation. Furthermore, information technology and the knowledge economy have made it possible for SMEs not only to be job creators, but also to generate high per capita value added. This of course applies essentially to those SMEs that are in knowledge-intensive fields. The structural transformations in the South African economy over the past three decades have increased the economic significance of the tertiary sector to over 65 percent of GDP at present. Large-scale firms, in turn, dominate the tertiary sector far less. As shown in Table 4 above, only 0,5 percent of firms in ‘Finance and business services’ and 0,4 percent of enterprises in ‘Community, social and personal services’ are classified as large. The trends in ‘technology deepening’ are likely to continue, enabling further establishment of SMEs across all economic sectors. The job creation capacity of SMEs is therefore expected to be more robust and increasingly to generate jobs that are skill intensive and well remunerated. Such enterprises are also likely to increase their share of the ‘gross operating surplus’ in the economy. As such their economic significance, as measured by the percentage share of GDP, is likely to increase over time.

Page 20: [1] Comment Chris Bohr

JOHANNISSON, B. 1992. Entrepreneurs as learners- beyond education and training. Paper delivered at Internationalizing Entrepreneurship Education and Training 1992, Dortmund, June 23-26.

Employment Equity in South Africa - MBA Dissertation

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