Two proposed laws may change the rules for South Africa’s hospitality sector, potentially restricting the employment of foreign nationals and investment by foreign-owned hotel groups.
FEDHASA has formally objected to the Employment Services Amendment Bill and the Business Licensing Bill, warning that, in their current form, they could stifle job creation and deter foreign investment.
“FEDHASA notes with serious concern the implications of both the bills for South Africa’s tourism and hospitality sector, investor confidence and the country’s broader constitutional and democratic framework,” said Brett Tungay, FEDHASA’s National Chairperson.
“While our objections certainly include constitutional concerns relating to freedom of trade, administrative justice, equality and proportionality, our concerns extend far beyond legality alone. At a fundamental level, these proposals raise profound moral and ethical questions about the direction of economic participation and freedom in South Africa.”
FEDHASA explained that South Africa’s hospitality industry is inherently global and its success is built on openness, international partnerships, skills exchange, cultural diversity and investment confidence.
“Legislation that enables the state to determine who may own businesses or who may be employed based on nationality creates a dangerous precedent that could ultimately normalise further restrictions tied to race, religion, ethnicity or political affiliation. FEDHASA believes this is not a path that supports a constitutional democracy, social cohesion or economic growth,” said Tungay.
Employment Services Amendment Bill
The Employment Services Amendment Bill gives the Minister of Employment and Labour the authority to set quotas on the number of foreign nationals a business can employ, broken down by sector, occupational category or geographic area.
The Bill has become a point of contention among different parts of the industry with some stakeholders claiming that it would offer the industry the opportunity to nurture more local talent while others say it could threaten specialised international skills.
Guy Stehlik, CEO and Founder of BON Hotels, told Travel News that he supports the Employment Services Amendment Bill.
“The skills are here, the workforce is here and it’s on us as an industry to develop local talent rather than look overseas. This Bill should push us to do what we should have been doing all along. There is no skills gap in hospitality that justifies looking elsewhere,” he said.
From Stehlik’s perspective, the South African hospitality industry could stand to benefit from the additional oversight as, he explains, some hotels, restaurants and tourism businesses take advantage of foreign employees, refugees and undocumented immigrants who are often willing to accept extremely low wages for their work.
However, FEDHASA is contesting the Bill, noting that rigid employment quotas would make the sector vulnerable due to its reliance on specialised and internationally transferable skills that are often difficult to source locally.
“FEDHASA supports meaningful local skills development and employment transformation. However, sustainable transformation cannot be achieved through inflexible quotas that ignore operational realities, regional labour variations or the global nature of hospitality,” said Tungay.
According to FEDHASA, the parts of the sector that will be most impacted by the Bill include:
- International hotel management and executive leadership positions within multinational hotel groups
- Specialised culinary professionals including internationally trained chefs and niche cuisine experts
- Foreign language specialists critical to inbound tourism markets
- Technical hospitality trainers and skills transfer professionals
- Luxury lodge, safari and premium guest experience operators servicing international clientele
“South Africa already faces serious tourism skills shortages, particularly in specialised hospitality disciplines. The risk is not simply the loss of foreign employees but the loss of mentorship, international standards alignment, skills transfer and operational expertise that support thousands of South African jobs throughout the tourism value chain,” said Tungay.
Revised draft Business Licensing Bill
The revised Draft Business Licensing Bill’s clause 17 allows the Minister of Small Business Development to reserve certain business activities or sectors wholly or partially for South African citizens or majority South African-owned entities.
According to FEDHASA, the Bill was uploaded to a government website with no gazette notice and no opportunity for public comment.
“Should these provisions be applied to hospitality or tourism-related sectors, the consequences for foreign direct investment, international hotel brands and future tourism infrastructure development could be severe,” said Tungay.
South Africa competes globally for tourism investment, attracting international hotel groups with regulatory certainty, investment protection and stable ownership frameworks enabling them to commit to long-term capital to developments, he explained.
Additionally, noted Tungay, the sector relies on international partnerships, franchise arrangements, management agreements and cross-border investment structures.
“Any perception that ownership rights may become restricted or subject to political discretion could significantly undermine investor confidence and may place future developments, pipeline projects and international expansion plans at risk,” he said.
There are also serious practical limitations to achieving majority local ownership in the sector as there is insufficient local investment capital available to support this across large-scale hospitality developments, Tungay pointed out.
“Many tourism projects require substantial foreign capital, international financing networks and global operational expertise that cannot easily be replicated domestically,” he said.
Both Bills promise to penalise non-compliant employers with penalties of up to R1 million or 10% of annual turnover.
“The proposed penalties create significant uncertainty for employers and investors alike. In a sector still recovering from the effects of COVID-19, energy instability and rising operational costs, additional regulatory uncertainty could discourage investment and delay expansion plans,” said Tungay.
The real challenge
According to Stehlik, the root of the problem this legislation is attempting to address will not be fixed with red tape but rather through the improvement of government-powered immigration systems.
“The blame here doesn’t sit with the immigrants. It sits with the state,” he said. “What concerns me is that businesses will end up with more red tape to navigate when the real problem is the slow and unreliable processing of immigration documentation. You can’t pass the full burden of this failure onto people who are simply trying to make an honest living.”
Tungay added: “Tourism is one of South Africa’s most internationally integrated industries. Policies that introduce uncertainty around ownership rights, labour mobility or participation risk damaging not only the sector but South Africa’s reputation as a welcoming investment and travel destination.”
