Economic relief must consider the disproportionate impact of COVID-19 on historically disadvantaged
Recognising the disproportionate impact that COVID-19 would have on black-owned businesses, the South African government introduced policies which set requirements that gave black-owned businesses an advantage. In a recent high court judgement, Solidarity OBO Members v Minister of Small Business Development, the court affirmed one such measure. This judgement upheld the commitment to substantive equality. More significantly, the judgement is important for the argument that there is a duty to take positive redistributive measures in favour of historically disadvantaged groups.
The case concerned the validity of regulations that set criteria for economic relief for businesses in the tourism industry. The regulations provided a scorecard, businesses with the highest score would be preferred for economic relief. Of the available 100 points, 20 points were reserved for the extent of Black ownership of a business. A wholly owned Black business would score 20 points. A wholly white-owned business could score a minimum of 2 points and a maximum of 8 points depending on steps the business has taken to advance transformation.
The applicant in the case was Solidarity, a conservative trade union that has been at the forefront of well-resourced strategic litigation against affirmative action in South Africa. Solidarity argued that the legislation under which the regulations were made did not empower the Minister to ‘introduce race based criteria as part of the qualifying criteria.’ The Minister argued that the racial criteria were made pursuant to the obligations in the Broad-Based Black Economic Empowerment Act (BEE Act), in particular, section 10. Section 10 of the BEE Act places an obligation on organs of states and public entities to apply any relevant code of good practice when ‘determining criteria for the awarding of incentives, grants and investment schemes in support of broad-based black economic empowerment.’ The Minister argued that the 20 point score was based on the relevant codes of good practice. To this, Solidarity argued that the scope of the economic relief could not include socio-economic strategies of the sought under the BEE Act. To do so fell beyond the scope of the empowering legislation under which the regulations were made.
The High Court found in favour of the government. In his judgement, Kollapen J held that the relief could further, as its main purpose, providing economic relief for all businesses affected by COVID-19, while at the same time furthering black economic empowerment, noting that: at the level of principle, these two aims were not inconsistent with each other and it was practically possible to pursue both aims. Further, he found that the regulations were sufficiently flexible and did not create an ‘insurmountable advantage for black businesses over white business’.
The judgement entrenches the principle of substantive against a formal approach to equality. In this regard, Kollapen J notes that ‘a race neutral response’ could have the effect of deepening existing patterns of disadvantage. For Kollapen J ‘in a time of a crisis, when people are their most vulnerable, context matters’. Thus, in line with the ‘general transformative trajectory of the Constitution in which the principle of equality finds centre place’, the racial criteria were valid.
Further, and arguably the most significant contribution of this judgement, Kollapen J seems to support the argument that when implementing laws and policies, there is an obligation on the state and its organs to take existing patterns of inequality into account and take positive measures to redress these. This can be discerned from his statement:
‘[T]he onset of the Covid-19 crisis has on the one hand united South Africans in dealing with and attempting to overcome the impact of the virus. On the other hand, it has also simply highlighted the fault lines in our society where it is so evident that more often than not the poor and the disadvantaged face the major brunt of the crisis. The response to the crisis must, therefore, recognise this uneven playing field and therefore calibrating such a response to deal with the impact of the crisis as well as the effect of historical disadvantage is not only permissible at the level of principle, but warranted and necessary’.
The argument that taking existing patterns into account is ‘warranted and necessary’ is an endorsement of the argument that the guarantee of the right to equality in s 9 of the Constitution, includes a positive obligation on the state to take positive measures, in some cases, preferential treatment of historically disadvantaged groups, such as that in this case. Failing which, it falls fouls of its duty to promote and fulfil the right to equality.