The Unequal Impact of Covid-19: Substantive Equality and Financial Relief in South Africa

Geoffrey Allsop & Ohene Ampofo-Anti

Haffegee Roskam Savage Attorneys & the South African Constitutional Court

On 15 March 2020, the South African Minister of Cooperative Governance declared a “state of disaster” in terms of the Disaster Management Act (“Disaster Act”) to combat  COVID-19. Shortly afterwards, a lockdown was imposed – one of the strictest in the world. 

To regulate the lockdown, several “lockdown regulations” were promulgated under the Disaster Act. Among other things, the initial regulations prohibited the sale of alcohol and tobacco, the sale of “non-essential” items and confined every person to their residence. 

Inevitably, these regulations severely curtailed the ability of most people to earn a living (save for those employed by an “essential service”) and placed significant strain on an already fragile economy, the most racially unequal in the world. 

The government, therefore, recognised that economic relief for COVID-19 affected enterprises would constitute a necessary part of its response. To this end, the Cooperative Governance Minister empowered other cabinet ministers, in terms of section 27(2)(n) of the Disaster Act, to authorise the taking of any necessary steps to “alleviate, contain and minimise the effects of the national state of disaster”. 

Under this authority, the Tourism Minister established the Tourism Relief Fund to provide financial relief to COVID-19 affected enterprises in the tourism sector. Whether an enterprise would receive support was determined by a point scoring system. According to the application criteria announced by the Minister, additional points would automatically be allocated to enterprises owned by black people within the framework of racial redress legislation; namely, the Broad-Based Black Economic Empowerment Act (“BBBEE”). 

Shortly after this announcement, the trade union Solidarity challenged the legality of the decision to allocate relief funding based on BBBEE racial redress criteria. In Solidarity obo Members v Minister for Small Business Development (“Solidarity”) the High Court dismissed this challenge. It concluded that the use of racial redress criteria in the allocation of relief funding was not only permissible, but in fact necessary to effectively remedy the adverse socio-economic impact of the pandemic.  

Below, we explain how the Solidarity court utilised a substantive conception of the constitutional right to equality to conclude that a “race-neutral” response towards relief funding would frustrate the objective of remedying the economic harm wrought by COVID-19. We further argue why a similar approach towards COVID-19 interventions, properly rooted in a substantive conception of equality, should be adopted in other jurisdictions. Before turning to Solidarity, we briefly set out the Tourism Fund application criteria.  

Tourism Fund application criteria 

The point scoring system for the Fund consists of 100 maximum points. Three criteria determine the ultimate scoring of an enterprise seeking relief: 

1. Regulatory requirements: a maximum of 25 points can be allocated, based on company registration, tax registration and unemployment insurance contributions. 

1. Functionality requirements: a maximum of 55 points can be allocated, based on proof of annual financial statements and the effect of COVID-19 on the business. 

1. Broad-Based Black Economic Empowerment status: determined by the enterprise’s ownership according to BBBEE racial redress criteria. This ranges from 20 points for a wholly black-owned business (level one) to 12 points for an entirely white-owned business (level four). A wholly white-owned enterprise could, however, achieve up to level two status (18 points) depending on any initiatives it has taken to facilitate or advance racial transformation in the tourism sector. 

Solidarity obo Members v Minister for Small Business Development 

The essence of Solidarity’s challenge was that the Minister lacked authority to allocate relief funding based on racial redress criteria. Their case broadly rested on two arguments.  

First, neither the Disaster Act nor lockdown regulations expressly authorised the Minister to provide financial relief based on the racial ownership of a tourism enterprise. As the empowering statute did not explicitly authorise the Minister to consider race in the allocation of funding, the use of such criteria violated the constitutional principle of legality which states that the exercise of public power is only legitimate when authorised by law. Second, the Disaster Act and lockdown regulations require the Minister to allocate relief funding for the sole purpose of “dealing with the destructive and other effects of the disaster.” The use of racial redress criteria would not achieve this purpose as all tourism enterprises (regardless of racial ownership) are affected equally by COVID-19.  

In rejecting both contentions, the High Court made two central points. First, there was no merit in the proposition that the Minister lacked authority to allocate funding according to racial redress criteria or that the use of such criteria would not deal with the “destructive and other effects of the disaster”. At a principled level, the court found that Solidarity advanced an interpretation of the Disaster Act and lockdown regulations which divorced itself from the constitutional commitment to substantive equality and racial redress. In making this point, the court noted that a “race neutral response can have the effect of deepening the fault lines in our society” and that context matters – more so during times of crisis when underlying vulnerabilities between different groups become most evident. Therefore, while neither the Disaster Act nor lockdown regulations expressly permitted the Minister to allocate funding based on racial redress criteria, it was only logical that if COVID-19 set back racial transformation in the tourism sector (by causing the closure of black-owned enterprises) that the Minister should take this fact into account to ensure the “destructive and other effects” of COVID-19 are remedied.   

Second, the flexibility of the redress criteria did not impose a disproportionate obstacle towards white-owned enterprises receiving relief. As the redress criteria consisted of a maximum of 20 points out of 100 (with 12 points guaranteed for a wholly white-owned enterprise), the differential of 8 points did not create an “insurmountable advantage” for black-owned businesses vis a vis white-owned businesses. In fact, it was entirely conceivable that an entirely white-owned enterprise could achieve a higher score than a wholly black-owned enterprise. 

Substantive equality and COVID-19 interventions  

While COVID-19 has effected the economic livelihood of all people, it has become increasingly clear that the socio-economic consequences of the pandemic are felt disproportionately by vulnerable socio-economic groups. Solidarity is a welcome acknowledgment of this nuanced reality in the South African context.    

Whilst Solidarity rejected a “race neutral” response towards COVID-19 interventions based on the South African Constitution, we contend other jurisdictions should adopt a similar approach, informed by substantive equality, to ensure the disparate impact of the pandemic on different groups is addressed.  

A foundational premise of substantive equality is that differential treatment between groups may be justified when undertaken to protect or advance the rights of vulnerable people or to redress historical injustice. It recognises that prima facie neutral laws or policies can, in fact, replicate existing patterns of systemic inequality. Therefore, if the State was never permitted to draw any distinctions between groups, to redress unjustified systemic disadvantage, a truly egalitarian society cannot be realised.   

For this reason, the South African Constitutional Court has consistently held that differential treatment between “advantaged” and “disadvantaged” groups is not an aberration from the constitutional right to equality. Rather, it is an intrinsic part of substantive equality. It recognises the state’s obligation to protect or advance vulnerable groups to rectify ongoing patterns of historical socio-economic injustice.  

These propositions are not unique to South Africa. It is a concept that has gradually developed over an extended period of time, and has also been endorsed by other apex courts including those of Canada and India. Substantive equality also finds support under international human rights law. For example, Article 1(4) of the International Convention on the Elimination of All Forms of Racial Discrimination (“ICERD”) and Articles 3 and 4 of the Convention on the Elimination of All Forms of Discrimination Against Women (“CEDAW”). 

The myth that COVID-19 uniformly affects all people equally, and the necessity for substantive restitutionary measures to address its impact, was recently discussed by the Special Rapporteur on Extreme Poverty, Phillip Alston, who pointed out that:   

“Far from being the ‘great leveler,’ COVID-19 is a pandemic of poverty, exposing the parlous state of social safety nets for those on lower incomes or in poverty around the world.  Poor people are more likely to be exposed to, and least likely to be protected from, the virus ... race, gender, religious, and class discrimination have skewed access to housing, food, education, and technology in ways that have yielded radically different outcomes.” 

Alston’s comments remind us how COVID-19 has exacerbated societal inequalities that existed before it began. Alongside race, other markers of disadvantage, such as gender or disability, equally provide indications of groups who are disproportionally impacted by the pandemic.  

We, therefore, contend States should adopt a race-conscious and intersectional approach towards COVID-19 interventions underpinned by substantive equality. This is necessary to address its catastrophic impact on both lives and livelihoods.  

Geoffrey Allsop is a candidate attorney at Haffegee Roskam Savage Attorneys, Johannesburg, South Africa. 

Ohene Ampofo-Anti is an attorney and law clerk at the South African Constitutional Court.  

Suggested citation: Geoffrey Allsop and Ohene Ampofo-Anti, ‘The Unequal Impact of Covid-19: Substantive Equality and Financial Relief in South Africa’ IACL-AIDC Blog (19 January 2021) https://blog-iacl-aidc.org/2021-posts/2021/1/18/the-unequal-impact-of-covid-19-substantive-equality-and-financial-relief-in-south-africa