ALREADY-DOWNSIZED SA COMPANIES MAY NOT BE ABLE TO CUT MORE JOBS AMID ECONOMIC STORM

The current challenges faced by businesses, including load shedding, soaring input costs, and aggressive interest rate hikes, are compounded by weakening demand in a fragile economy. In normal circumstances, this would typically lead to a wave of layoffs and job cuts.

However, economist Azar Jammine, who serves as the director of Econometrix, believes that many businesses have already downsized their workforce significantly during the pandemic. The substantial retrenchments witnessed during the Covid-19 period allowed businesses to streamline their operations.

As a result, despite the escalating costs, businesses are unable to afford further layoffs without risking their operational capabilities. South Africa still has one million fewer jobs compared to pre-pandemic levels, according to labour law specialist Andrew Levy. Levy anticipates that employers will continue downsizing their workforce, but he does not foresee an immediate surge in large-scale retrenchments.

Jammine suggests that businesses will explore alternative cost-saving measures and seek ways to protect themselves from the Eskom and Transnet crises, such as generating their own power and reducing reliance on the rail network.

Sharon Pearce, an HR transformation expert at Flux Trends, highlights that many companies have frozen positions for extended periods following resignations, a practice that has been ongoing since before the pandemic. Some positions remain unfilled or are replaced by contract workers rather than permanent employees. This trend exposes contract workers to greater vulnerability in terms of potential layoffs, as businesses often target cost reductions by cutting contractors’ bills before resorting to retrenching full-time employees.

Overall, South Africa’s labour market is still in crisis, with the number of unemployed individuals increasing from 4.9 million to 7.9 million over the past decade. Jammine identifies the problem as more than 400,000 people entering the job market annually while job creation falls short of meeting the demand.

Looking toward the future, Levy expresses concern about the long-term impact of artificial intelligence (AI) adoption. However, he believes that South Africa will likely lag behind in this aspect, considering its position as a primarily resource-based economy with limited involvement in high-tech sectors.

In summary, businesses are grappling with various challenges, and while layoffs may not witness an immediate surge, the labour market remains under strain. The country’s long-standing issue of insufficient job creation persists, and the adoption of advanced technologies like AI poses further concerns.