Changes to the labour policies
By Jessie Taylor Nedlac proposals signal major overhaul of labour laws in South Africa South Africa is on the brink of its most comprehensive labour law reform in decades, following the conclusion of extensive negotiations between organised business, organised labour, and government under the auspices of the National Economic Development and Labour Council (Nedlac). If the proposed amendments become law, they could fundamentally alter the country’s employment landscape—especially for high earners, small businesses, and workers facing retrenchment. The reforms aim to streamline dispute resolution, enhance worker protections, and promote greater flexibility for start-ups while addressing inefficiencies in existing labour systems. They span four key pieces of legislation: the Labour Relations Act (LRA), the Basic Conditions of Employment Act (BCEA), the National Minimum Wage Act (NMWA), and the Employment Equity Act (EEA). In total, the proposed package includes 65 legislative changes—47 to the LRA alone. A new framework to streamline dispute resolution A central feature of the proposed reforms is a limitation on the remedies available to high-income earners (defined as those earning more than R1.8 million annually). Under the proposed changes, these employees would no longer have recourse to reinstatement through the Commission for Conciliation, Mediation and Arbitration (CCMA) in cases of unfair dismissal—unless the dismissal is found to be automatically unfair, such as whistleblowing or discrimination. Instead, remedies for other unfair dismissals would be restricted to capped compensation. The earnings threshold will be adjusted annually based on the consumer price index, and the changes aim to reduce the caseload burden on the CCMA and speed up dispute resolution processes. Another major focus is retrenchment law. Labour stakeholders successfully pushed for the extension of the facilitation period in large-scale retrenchments from 60 to 120 days. This is designed to ensure that retrenchment is a last resort, and that employers have exhausted all alternative options. Additionally, statutory severance pay is set to increase from one week to two weeks of remuneration per year of service – although business representatives opposed the change. The amendment will only apply to service accumulated after the commencement of the new legislation. Other proposed changes to the retrenchment process include: These reforms aim to align legal processes with Labour Court rulings and to reduce delays in resolving retrenchment-related disputes. Start-up relief and small business flexibility In a move aimed at encouraging entrepreneurship, the government proposed exempting start-up businesses with fewer than 50 employees from conditions set by extended bargaining council agreements. This proposal was supported by business, but opposed by labour, which raised concerns about potential abuse. To mitigate this risk, additional safeguards are proposed, such as requiring that the directors of a new company not have previously been registered within the last two years and imposing a financial threshold to prevent wealthy entities from qualifying as start-ups. These changes form part of a broader recognition of the role that small and medium-sized enterprises (SMMEs) play in job creation and economic growth. Another significant change involves revising the scope of what constitutes an unfair labour practice. Under the proposed amendments, issues such as disputes over promotions would no longer fall under this definition. Instead, the focus would be limited to unfair suspension or disciplinary action short of dismissal, and occupational detriment arising from protected disclosures. However, a one-year transitional period has been proposed for certain sectors—such as public service, education, and police—during which time promotion disputes can still be pursued, allowing time for new collective agreements to be established. Another key area of reform is procedural fairness in dismissals. A proposed amendment clarifies that an employee must be given a fair and reasonable opportunity to respond to allegations before dismissal—reinforcing a move away from overly formal or adversarial processes. Furthermore, a new three-month probationary period is proposed, during which new employees will have limited protection from unfair dismissal. The rationale behind this is to reduce hiring risks and encourage job creation, especially for young and inexperienced job seekers. The Nedlac Report, including draft amendment bills and supporting working papers, has been submitted to Employment and Labour Minister Nomakhosazana Meth. The next steps include review by the State Law Adviser, followed by submission to Cabinet and then Parliament. Once tabled, the proposed laws will be subjected to the full legislative process, including public participation and potential revisions. Notably, not all proposals received unanimous support from Nedlac’s social partners. This means further negotiation and refinement may occur during parliamentary deliberations. While some future-facing issues—like remote work, climate-related heat stress, and just transition policies—have not yet resulted in specific legislative proposals, working papers on these matters have been developed and may inform future reforms. Sources: Engineering News | Business Live | BizCommunity
VAT? What’s that?
By Koketso Mamabolo What’s VAT? Three simple letters have dominated headlines since the unprecedented delay of the budget speech in February, drawing speculation from all corners of the country, whether it be in the corridors of power, or in homes, on sidewalks, in public transport and all the places where people interact as they go about their lives, where every cent counts. Value-added tax (VAT) is the main indirect tax on goods and services. For most consumers it’s an extra cost we rarely think about unless we look closely at our till slips. We know that when we pay R100 for an Uber trip, for example, R15 goes to the South African Revenue Service (SARS). For Uber, and many other businesses, it’s a cost they factor into the final price, and revenue which they then pay to SARS. Referred to as ‘traders’ or ‘vendors’, who make taxable supplies of more than R1-million per annum, they have to register, and it must be charged on goods and services at every stage of production and distribution, including on importation and imported goods. Why VAT? In her book The Deficit Myth, economist Stephanie Kelton argues that there are four reasons why there are taxes of any kind. If the government allowed consumers to merely spend without taking a portion it could lead to an oversupply of the rand which would mean too much money would be ‘chasing’ too little goods and services. In other words, there would be more money than things to spend it on, otherwise known as ‘inflation’, which is one reason Kelton argues that we are taxed. A second reason, she says, is that tax can be used as a tool to change the distribution of wealth and income. With widespread inequality, it has long been referred to as a possible way of reducing the gap between rich and poor e.g. wealth tax. Governments can also use taxes “to encourage or discourage certain behaviours.” The ‘sin’ tax on tobacco products and alcohol, which always goes up (often above inflation), is an obvious example of a tax which is aimed at disincentivising consumption, as is carbon tax and South Africa’s progressive sugar tax. A fourth reason, one which is behind the increase the Finance Minister has proposed, is that taxes “enable governments to provision themselves without the use of explicit force.” The idea being that if the government stopped requiring taxpayers to pay using their rands there would be less taxpayers leaving the government with less money to spend on public goods and services such as roads, schools, healthcare facilities, and the salaries of the people needed to provide it all. With the initial 2% VAT hike National Treasury was expecting SARS to collect R58-billion in revenue to bolster efforts to fund a ‘growth’ budget which would dish out additional resources for education and healthcare, among other things. While taxes are an old instrument of funding the work of the state, VAT is a relatively new concept in South Africa, introduced only three years before the country became a democracy. Before VAT we had GST, the General Sales Tax, which was introduced in 1978. It began at a modest 4% but rose to 12% in early 1985. Unlike VAT, which has a limited number of goods and services which are exempt, GST was not charged on most food and most services. It was an administrative strain and did not generate much tax revenue. Enter VAT in 1991. What goes up… must go up? VAT was introduced as a way of simplifying indirect tax administration and broadening the tax base, creating a significant source of revenue for the state. It started at 10% and in 1993 was increased to 14%. The next increase was a quarter of a century later in 2018, to 15%. And now, in May this year, if the proposal is accepted, we’ll see a 0.5% increase, with another half a percent on the cards in April next year, pending review. In both instances, 2018 and 2025, the budget deficit has been a significant reason why this indirect tax was chosen as a means for collecting revenue. In short, if the government has to spend more than what SARS collects then they are left with a deficit. There are different schools of thought around how governments can proceed. Kelton belongs in the camp which, as the title of her book The Deficit Myth suggests, argues that the state is the sole issuer of a currency and is able, within certain limits, to fill the deficit by using the power of reserve banks to print money. In economic circles this concept is considered somewhat of a heterodox one, and the more orthodox line of thinking is wary of the inflationary effects of printing money, among other criticisms of what is called ‘modern monetary theory’. The dominant, orthodox strain approaches the deficit with caution, opting to incur debt as a way of filling the gap, and then working hard to service the debt and not incur too much more debt relative to the country’s gross domestic product (GDP). When VAT was first introduced, in 1991, the country’s debt was 33.9% of GDP, according to the World Bank. It had shot up to 59.1% by 2018 and is now sitting staggeringly close to 80%. National Treasury’s approach has been focused on debt as the main issue to contend with and has sought, quite aggressively, to tame it. From the time the ‘Governor’, the late Tito Mboweni, was called in to steer the ship as Finance Minister, through to his successor, Pravin Gordhan, until Hon. Enoch Gondongwana’s current tenure, austerity has been the main instrument used to try and deflate the balloon. There are many economists, like Kelton and the passionate South African economist Duma Gqubule, who would highlight that austerity has clear, negative effects, leaving a shortage of public servants and shortfalls in funding for necessary goods and services. The VAT hike, the Finance Minister explained, the day after “Budget 2.0”,