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Two weeks into 2020 and already almost 6 000 jobs are on the line

Mostly due to politics and poor decisions rather than external factors.
Telkom’s ICT services arm BCX moved into an impressive new building in Centurion in 2017. The telecomms company is now looking to shed 3 000 jobs. Image: Supplied

Barely a month into 2020, retrenchments, the trimming of workforces and restructuring talks are dominating the news.

In recent years, the mining industry has been the one undertaking such actions, but last week’s announcements came from companies in the telecoms and retail sectors.

Telkom announced plans to cut 3 000 jobs, Sibanye-Stillwater revealed that it has given voluntary packages to 1 142 employees as part of its restructuring process, and Massmart said that it may close 34 stores, which will affect at least 1 400 employees. That is a possible 6 000 jobs gone, just two weeks into 2020.

And one gets the sense that restructuring activity will not be limited to the private sector. State-owned entities (SOEs) such as Eskom, SAA and the Passenger Rail Agency of South Africa (Prasa) will be forced to do likewise to ensure their survival.

If we are to use this as indication of how 2020 is going turn out, then by all means it is an omen of bad year ahead.

Unfortunately, with a growth rate of of 0.9%, the economy offers no solution to either job losses or the creation of employment opportunities. This adds to the precariousness and segmentation that has become characteristic of the labour market. in the past 13 years,

South Africa’s labour market has changed in the past 13 years, influenced mostly by the underperformance of the economy as well as external factors such as the global economic crisis and a world that is embracing technology.

Winners and losers

Consequentially, the impact of limited growth and economic stagnation is disproportionate to employers and employees, and has created winners and losers. Companies in sectors such as mining, manufacturing and agriculture have responded to these changes by streamlining their operations, adopting technology and trying to find a way to reduce their exposure to organised labour risk.

It is significant that restructuring is occurring in the public sector too, albeit at a slower pace than in the private sector. This is happening for known reasons, with perhaps the most important being the unsustainability of a rising public sector wage bill and spending against the backdrop of rising government debt.

This means government finds itself between a rock and hard place.

On the one hand, public spending that is out of hand mostly due to the debt of SOEs means using fiscal policy to try and jumpstart growth has not worked. In fact, it has pushed South Africa further down the debt hole.

On the other hand, government, including the SOEs, cannot afford to keep its perpetually increasing workforce – it doesn’t have the money. If the late payments to employees by various municipalities is anything to go by, it seems government simply won’t be able to sustain the rising wage bill.

Compounding the problem

Why is being between the rock and hard place a problem? The key concern is that, like companies responding to the changes in the world market, governments have to respond in such a way that they can keep up. However, two factors stand out.

First – being riddled with debt that is increasing, with a large workforce and SOEs that are floundering and in debt is not a sustainable way to run a government.

Second, and related, is that sooner or later government may find itself unable to service its debt and in need of loans from the International Monetary Fund (IMF).

IMF loans come with strict conditionalities that may prove more costly than if government undertook a self-imposed process of restructuring and reform.

The bottom line is that South Africa being in this mess is of its own doing.

Yes, there have been external factors beyond its control, but the severe joblessness and other social problems that have emerged from it is our own doing. In previous articles I have demonstrated how it has always been strong the hand of politics over economic reality that has led to this very moment.

A good deal of what I have called attention to – such as the regulatory framework, politicians’ lack of understanding of the effects of the global economy on the country, and its inability to produce coherent policies that can react to these changes – are self-inflicted.

Given that 2020 has started as the year of the culling of jobs, it is likely that the current 29.1% unemployment rate will break into the 30s.

Considering the projected growth and the often-cited regulatory constraints, the year will continue to see a retreat in investment and very little job creation.

This prolonged economic stagnation that has increased unemployment and failed to reabsorb the unemployed (including graduates) is strengthening the case for structural reform.

Read: Traditional labour policies are hurting SA

If Finance Minister Tito Mboweni’s tweets and his last Medium-Term Budget Policy Statement are any indication, a tougher stance by Treasury is likely as he continues to seek structural reform.

To start with, we may see fiscal consolidation that will include the restructuring of SOEs, reducing their bulkiness and transforming them into leaner companies that can self-sustain. Secondly, government will need a revised labour policy that has considered how technological changes in the global economy have changed the labour market.

Will Mboweni find support from his party and government? That remains to be seen.

What I do know is that sooner rather than later, unless there is a convergence of labour market, economic and even fiscal policies, South Africa’s key problems will persist – including the relentless retrenchments.

 

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COMMENTS   19

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Well then. ‘We’ did steel some copper wire from Eskom forcing them to go wireless. Then ‘we’ burnt some trains as well, Prasa can’t be very happy with that. SAA? Eskom? We all know what happened to them.
Massmart and their 34 stores? Don’t these people do any customer research before they open stores?

Walmart was rather arrogant when they took over Massmart. They were going to show us how Americans are far superior … however they stumbled.

Mark Lamberti was a super CEO who turned Massmart into a Giant, Walmart destroyed it. Will Mitchel Slape make any difference?

Sorry. Steel copper wire from Telkom.

They run the country like they run a state funeral. The best-qualified among them, the generals with the clanking yellow medals of the colonialist, all dressed up in the uniform of the colonialist, amateurishly imitating the rituals of the colonialist, faking the competence and readiness of the colonialist, producing only false pretence and incompetence, to the extent that it is excruciatingly embarrassing, not for the laughing spectators, but for themselves and the for State they represent.

They honour their heroes with a farcical state funeral, where generals walk into each other in total confusion. This is typical of the ANC – One simple command goes out, then parties move in opposite directions, dazed and confused, querying the command and discussing the actual meaning of the command. Afterwards, after failed attempts of rationalisation and obfuscation, they produce a lame excuse for the inexcusable by blaming it on colonialism.

This is the Government of the Republic of South Africa. The job-losses are the casualties of this disastrously inept and farcical imitation of governance. By employing unproductive people at SOE’s, they are even imitating job-creation. Fake it until you make it.

In this government’s case, it’s rather “Fake it until you break it”…

I wish I could vote a million times for this comment

Clearly here we have the after effects of the Zuma years. All that Cyril can say is “we need to ensure this” and “we need to ensure” that’.
He certainly did not “ensure that” Zuma was stopped and stood by in an idle fashion. Things will change however, they will get worse.
This is what you get from a quarter of a century of cANCer being in control.

Govt projections for growth are a piped dream.

This is a useless article by some millennial schooled in ANC speak.Meaningless drivel using fancy words. This mess is caused by the corrupt ANC and friends and supporters. Nobody else. Not South Africa or we or the private sector. ANC.

“CONDITIONALITIES” what?

I can think of a number of trite clichés, but “the chickens coming home to roost” seems most apt here.

“The notion of bad deeds, specifically curses, coming back to haunt their originator is long established in the English language and was expressed in print as early as 1390, when Geoffrey Chaucer used it in The Parson’s Tale”.

Crime will rise and rise.

Mamokgethi’s C.V. says it all – for an analyst (mining and labour)she can’t see the wood for the trees
Why is Moneyweb print such drivel when they know very well that articles like these are skewed and poorly researched by their authors

When will the ANC create the enabling environment for growth and employment? When?

Maybe they can’t if they stick adherently to their current policies.

They’re busy “communising” South Africa, so don’t hold your breath!

These companies must have misunderstood – I think the government is targeting new Hiring, not Retrenching? The ANC must be sitting at their clean desks in their gleaming offices, very perplexed by this. “Weve stated that we want new Hires; what more can we do?”

I see a lot of smaller companies just flatly ignoring all of the red tape that govt throws at them, and carrying on regardless. This leads into a burgeoning informal sector and lack of tax income, Zimbabwe style. The big fish who are easier to force to comply with the myriad laws and regulations are being legislated out of existance.

Maintaining currency strength in a world dominated by easing printing have direct results in the market. Some lines go up, others down. Watch the value of the R again the unlimited printed ones like Euro/U.S dollar on the time line 15 to 20.

A drop in the ocean. The anc wants to have Venezuelas unemployment rate – 95% I believe. Then the Marxist utopia will be truly accomplished

End of comments.

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