Job cuts will depress SA’s limping economy even more

Unemployment rate at the highest in at least 11 years.
South African companies plan to shed almost 6 000 jobs. Image: Moneyweb

Less than a month into 2020, South African companies have already announced thousands of job cuts. In a country where a third of the labor force is already unemployed, this will put even more strain on demand and economic growth.

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

Almost 6 000 jobs are at risk as companies including Telkom, the country’s largest fixed-line operator, and Walmart’s local unit Massmart plan to reduce their headcount after slumps in earnings. That’s after Sibanye Gold cut positions at its Marikana operations as part of restructuring plans and Glencore issued a notice of possible reductions at its Rustenburg ferrochrome smelter.


If realised, these job losses will add to an unemployment rate that is the highest in at least 11 years, and place a further damper on demand and consumption spending in an economy stuck in the longest downward cycle since World War II. Growth in household expenditure, which makes up 60% of economic activity, slowed to 0.2% in the third quarter despite a reduction in the benchmark interest rate.

“Labor market dynamics — job growth, income growth — are the most important drivers of consumption expenditure and I worry that if we see more of these kinds of announcements it could further depress household consumption expenditure,” said Miyelani Maluleke, a senior economist at Absa Bank.

An economic blueprint that President Cyril Ramaphosa co-authored a decade ago aims to reduce joblessness to as little as 6% by 2030, but the government’s actions are not helping. In addition to a lack of urgency in implementing policies that’ll boost growth and convince businesses to invest and expand, the state and its companies are also reducing workers.

Finance Minister Tito Mboweni has made it clear the state wage bill has to be trimmed, and that means a government that employs fewer people. Despite opposition from labour unions, the restructuring of power utility Eskom, which has billions of dollars of debt and a bloated workforce, will lead to job cuts when it eventually happens. The national carrier, South African Airways, is in bankruptcy protection and started canceling flights on Tuesday to save cash, a step that could usher in a reduction in staff.

South Africa’s unemployment rate has remained above 20% for at least two decades, largely due to insufficient economic growth. Since 2015, population growth has outpaced growth in gross domestic product every year.

That means the economy “doesn’t even begin to scratch the surface of what is required in terms of jobs for new entrants in the labor market,” Maluleke said. “As a result I think you’re going to see the employment rate grow.”

South Africa’s economy hasn’t expanded by more than 2% a year since 2013 and neither the central bank nor the National Treasury see it reaching that level by 2022.

The economy needs sustained GDP growth of 2.5% to 3% to stabilise and to reduce the unemployment rate, Maluleke said.

Read: SA manufacturing, business confidence falls take shine off investment drive

SA Q3 unemployment rate stays at 11-year high

© 2020 Bloomberg L.P.


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Drop all income tax and put VAT up between 3%-10% on all products the middle class and rich buy which will result in the government collecting the same amount of tax for cheaper and will result people on the ground having money to spend in the real economy on goods and services which will result in new jobs being created. If all income tax is dropped we will have a boom backed by real money not debt which will be a lot safer.

Dropping income tax would also make South Africa an tax haven for international companies who would open up businesses here which will result in more job being created.

Pass a law as well to force banks to lend more money to people to build affordable houses/flats for other people to buy or rent, instead of pumping money into the existing housing markets which just results in inflation. If the house prices and rent prices came down first time buyer would have smaller mortgages to pay and renters would have cheaper rents to pay which would result in them having more disposable income to spend in the actual economy on goods and services which would create more jobs. High house prices is just a sign of inflation i.e too many people chasing too few goods.

The Federal Reserve Bank of the US is independent from the US president.
The Federal Reserve Bank policies has much more to do with US economy strength than the Trump. The Federal Reserve cutting interest rates to stimulate job growth played big part in the US economy as people have more money to spend in the US to create jobs. The majority of Americans support American companies and products and services.

You could have a donkey as US President right and the US economy would still be doing well because of the Federal Reserve Bank and the American people attitude to support American companies products and services.

Poor Yanni

Typical economist IYI like you pushing on a strings in the economy and you can not accept somebody elected as obnoxious as Trump has anything good.

In SA the reserve bank is independent and we had donkeys running the government for more than 25 years with all sorts of progressive ideals yet SA is racing to Zimboland.

No, it is a fact a country requires somebody competent in power that can take actual measures to support its industries, not an economist.

US rates was hiked since 2016. only lowered since 2019.

Drop all income tax in South Africa and put VAT up by 3%-10% on goods and services the middle class and rich buy this will result in people having more money to spend in the actually economy on goods and services which will result in new jobs being created. Dropping all income tax in South Africa would also result in South Africa becoming an investment haven which also result in more jobs being created.

A law should also be passed to force the banks to lend more money to people to build affordable middle class houses/flats for other people to buy or rent instead of the banking lending money to inflate(inflation) existing house prices. Buying a lot more affordable houses/flats would create a lot more jobs as well. High house prices are just sign of inflation i.e. too many people chasing too few houses.

What is the alternative to these job cuts?
Pray tell.

1.The Fat cats at the top take pay cuts. This money used to save jobs at the company.

2.The South African government drop all income tax and put VAT up between 3%-10% on all goods and services the middle class and rich buy, this will result in more money being spend in the actual economy which will create jobs.

The fat cats at the top are the cats that keep the country going.
Now, please tell us at what income do one become a ‘fat cat’?
Then tell us at what income the ‘middle class’ start.
Then get your head out of your butt.

Unfortunately more job losses are coming as many small businesses are close to failure and the consumer is very stretched -largely due to colossal increases in rates, electricity and taxes-in turn largely due to theft and incompetent staff employment everywhere-so will cut back on domestic workers and allied services( pool cleaning, home maintenance, luxury goods and services etc)

Persistent mismanagement comes home to roost and projected economic growth below population growth simply means that the average person is worse off- a better life for all-not under the incompetent and corrupt leadership of the criminal clique in the ANC-no way!

You know!… I am speaking like an old lady drawing water from a river down under in the rural village of Phohloza, the 10th province of Mzansi.
The village and the province have the same name “Phohloza”.

She asks…”I hear everywhere they talk of unemployment, unemployment… Eintlik,whose business is it that people are employed of nie werk het nie?…Hayi mina angazi stru…


There are other companies that isnt on this list: Mittal +- 1200 jobs and what about the 4 major banks who also indicated huge jobs cuts. Then in the mining industry I believe are another few thousand job losses soon!

The opposite is true. If there were significant job cuts, and here I’m talking about 30-50% of all staff, at all state owned enterprises and the public alleged service, this would be a huge boost to the economy. All SOEs and the public alleged service are grotesquely overstaffed and a tremendous drain on the economy.

Cut 40-50% of all staff all you create is more money for the looters or you’ll be making more room for more looters to come into the party… Cutting jobs is never a solution… Its too easy.

Draconian decisions need to be made to turn things around… being nice wont solve the problems…

End of comments.





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