This article presents a dynamic computable general equilibrium model which measures the impacts of the affirmative action policy set up in South Africa. In order to reduce inequalities inherited from the former regime on the labour market, the government is encouraging firms to employ Historically Disadvantaged People (HDP) as skilled workers. This study aims to assess the impact of this employment policy on labour and income redistribution. The findings show that this policy reduces unemployment both in the short run and in the long run. Moreover, the government’s deficit is reduced in the long run, making South Africa less dependent on the rest of the world.
