On April 12, South African President Cyril Ramaphosa signed into law the Employment Equity Amendment Bill of 2020, which sets out “equity targets” to accelerate racial equality in the business sector.

The legislation is part of “new measures to promote diversity and equality in the workplace”, the government said. Like the principles of Black Economic Empowerment, the original act was crafted in part to promote the economic empowerment of Black South Africans who were systematically marginalised during apartheid.

Yet years later, the continent’s most industrialised economy still has “one of the highest and most persistent inequality rates in the world” which is “perpetuated by a legacy of exclusion”, according to the World Bank.

Almost half of Black South Africans were unemployed in the first three months of 2023, while the jobless rate was only 9.5 percent among white people, according to official figures.

At the higher echelons of business, inequality is also evident: Black people who make up 80 percent of the employable population account for just 16.9 percent of management jobs, while white people who comprise about 8 percent of the employable population hold 62.9 percent of top management jobs (PDF).

Twenty-five years since the enactment of the original EEA, “this is still the picture and nothing has changed,” Masilo Lefika, the Department of Employment and Labour’s deputy director for employment equity said in a statement this week.

Here is all you need to know about the new law and the debate it has stirred.

What does the law say?

The EEA amendment applies to businesses classified as “designated employers”, or those who employ more than 50 people. They are to submit plans detailing the demography of the area they operate in and how their companies will achieve stipulated equity targets.

In the previous legislation, employers would set diversity targets for themselves, and report to the labour department about how they fared in attempts to achieve a diverse workspace.

Under the new law, the minister of employment and labour will identify certain sectors in need of transformation and impose a “numerical target” to achieve racial diversity – a target that employers must then comply with.

Companies seeking to do business with the state will be required to submit a certificate from the labour department confirming that they comply with the law; however the EEA does not apply to the country’s security and intelligence agencies.

Using the construction industry as an example, Insights, a human capital consultancy firm, said the sectoral target “for professionally qualified Africans” in the industry is 65.2 percent within the next five years, an increase from the current 46.9 percent.

The purpose of the “equity targets” is to encourage equitable representation of people from historically disadvantaged groups. But “in an economy that is regressing rather than growing and where job opportunities are thin on the ground, businesses will find these targets very difficult to achieve,” Insights noted.

What are the criticisms?

South Africa’s main opposition party the Democratic Alliance (DA) criticised the new law, saying it prescribes “race quotas” for companies and would cause harm to the economy. Members of the party marched to parliament in Cape Town on Wednesday in opposition to the act.

Michael Cardo, DA shadow minister of employment and labour, called the act “a knee-jerk, electioneering ploy” of the ruling African National Congress (ANC) ahead of the 2024 polls, and “devoid of any thoughtful consideration of the far-reaching implications”.

The DA said the act “will cause at least 220,000 white people, 85,000 coloured people, and 50,000 Indians to lose their jobs” within the next five years in Gauteng – the country’s industrial hub.

About a third of South Africa’s population of 60 million is already unemployed and soaring costs of living as well as rolling electricity cuts have exacerbated economic woes in the country, especially for its poorest demographic – Black people.

The Institute of Race Relations, a South African-based research and policy think tank, has said “race-based policies have not worked” to lift millions out of poverty and instead recommended a skills-based approach to inclusive employment.

Solidarity, a mainly white trade union, has written “to at least 2,000 of the major companies in South Africa, urging them to record their protest against the latest race law”. According to the union, the legislation is “turning South Africa into the most racially regulated country in the world”.

Already, controversy and misunderstandings surround the implementation of the law. After the Department of Water and Sanitation released guidelines setting the minimum Black South African shareholder requirements for water licensing applications in May, agricultural groups warned that the “race quotas” would threaten food security.

But as the director of water allocation, Sipho Skosana, explained to local media, 98 percent of South Africa’s water resources have already been allocated – and the new regulation would not apply to that.

Skosana did note that of the water that has been allocated, 66 percent – or 5.83 billion cubic metres – is used in irrigation and, of that, 5.74 billion is “in the hands of white irrigators”.

“This situation is not normal; we can’t have a situation where the majority of the people in the country only have 1 percent of the water resources critical for development,” he said.

What do supporters of the law say?

South Africa’s government says the new legislation, supported by the ANC, will not cause job losses and only result in fairer representation in the workforce.

Shortly after the president signed the bill into law in the parliament in April, the Minister of Employment and Labour, Thulas Nxesi, said: “There is no empirical evidence to indicate that the employment equity amendments in relation to regulation of sector EE targets might have unintended consequences on employment.”

The Congress of South African Trade Unions (COSATU), the country’s largest labour body, has also come out in support of the EEA.

In a statement, COSATU’s parliamentary coordinator, Matthew Parks urged the Department of Employment and Labour to “move with speed to ensure the promulgation and implementation of these long overdue provisions”.

According to the trade union, the bill is a “badly needed intervention to strengthen the government’s ability to hold employers accountable”.

According to Frans Rautenbach, a Cape Town-based labour lawyer, “It is clear that the overall aim and object of the EEA, both old and new, is to provide equitable opportunities to Black employees and to ensure demographic representativeness. As long as an employer demonstrably and in good faith pursues those objects by implementing ‘affirmative action measures’, and follows the prescribed procedure, it will comply with the Act.”

Gilad Isaacs, director of the Institute for Economic Justice, a South African think tank, said companies mainly focus on maximising profits and making decisions that secure higher dividends for shareholders. They are less likely to invest in the diversity programmes that the EEA is proposing, hence the need for the recent amendments.

Isaacs said the business sector can react negatively to policy amendments that set “equity targets” or those geared towards affirmative action and diversity hiring. Therefore, the EEA forms part of continuing efforts to “change the nature of corporate governance”, he said.

The global trend of outsourcing and the casualisation of workers is part of a weakening corporate responsibility, Isaacs added, saying companies have moved to an area where workers are no longer their problem and they require need their skills.

“What we need are strong regulations which channel investment for the long term. We need a government willing to take on such challenges,” Isaacs told Al Jazeera.