Retrenchment warning for South Africa
Large-scale retrenchments may be on the horizon if South Africa’s economy continues to struggle, says Michael Gullan, the CEO of learning and development group G&G Advocacy.
Another local recession may be headed our way, and it could not come at the worst time for South Africa’s economic recovery after the pandemic and as the country struggles with political uncertainty and a failed electrical grid, said Gullan.
“In the event of a recession, employers may have to restructure and retrench to protect their fiscal sustainability and ensure that most of the workforce remains employed.”
The Bureau for Economic Research (BER) has reported that South Africa is flirting with a full-year recession, with current projections for economic growth sitting at extremely low to nothing.
The group said its current projection for full-year GDP growth in 2023 is at 0.2%, while the South African Reserve Bank has revised its estimate up slightly to 0.3%. As it stands, analysts are awaiting first-quarter GDP data to try and see if South Africa has been able to miss a technical recession.
Some finance groups, like Nedbank, believe GDP growth for Q1 will come in at zero, while the SARB currently expects marginal growth of 0.4%. The problem with estimations is that they can be way off – most analysts anticipated a quarterly decline of 0.7% in Q4 and the printed number was almost twice that, at -1.3%.
The main killer of economic growth is load shedding. While positive signs have emerged that South Africa may have missed a technical recession, doubts still linger.
And with load shedding expected to get worse before it gets better, the economic trajectory of the country could spiral further in the coming quarters.
Legal experts from ENS Africa also warned employers of the possibility of poor economic growth leading to retrenchments.
They said that in light of interest rates that continue to hike, businesses’ cash flow is decreased, and revenue is also affected as consumers have less money to spend on goods and services – adding strain to companies.
ENS Africa said this might force some employers to consider restructuring their businesses to optimise their resources.
“When all else fails, employers may have to terminate employees’ employment on the basis of their operational requirements,” said the legal experts.
Operational requirements are based on the economic, technological, structural or similar needs of an employer.
On 25 May, the South African Reserve Bank (SARB) raised interest rates yet again by another 50 basis points, taking the prime lending rate to 11.75% and marking the tenth hike in the rate hike cycle that started in November 2021, totalling 475 basis points over the period.
Employers’ duties
Legal firm Cliffe Dekker Hofmeyr (CDH) says that in terms of South African law, a retrenchment process can only be embarked on for genuine operational requirements.
It added that it is important for employers to consult with employees, unions and other relevant stakeholders when undergoing the process.
CDH noted that employers cannot use retrenchments to address pre-existing issues, such as poor performance or misconduct.
Gullan said that following possible retrenchments, employers will have a long journey of rebuilding confidence and trust amongst their remaining employees.
He said it is for this reason that employers must be prepared with a plan to improve workplace performance in an attempt to rebuild trust.
Gullan provided the following strategy from HR teams to rekindle trust and a sense of security in a company:
- Reevaluate your organizational goals and communicate them to your employees.
- Clarify new processes because of changes in your workforce.
- Reflect on the skills of your current employees and identify new skills gaps.
- Prioritize training and skills development to address skills gaps and process updates.
- Assign subject specialists with in-depth organizational knowledge to work with your eLearning partners to share knowledge with the organisation.
- Through strong internal communications, nurture a learning culture so your organisation is stronger in turbulent times.
Bouncing back after a retrenchment
The CEO of G&G Advocacy said that it is important for retrenched employees to review their skills and ready themselves for the next opportunity.
He said that the lifespan of skills is getting shorter, and most people will end up working into their 70s – yet their skills will only be relevant for five years or less.
“The greatest currency any employee has is not your previous job or job title, but the skills you pick up along,” said Gullan.
“If you have unfortunately been retrenched, stay positive and open to new opportunities within and beyond your capabilities. Review your skills, plug the gaps, and be ready for the future,” said the CEO.
He provided the following tips for getting back on your feet:
- Do a personal stock take and assess the skills you’ve acquired over the years.
- Categorise your skills into three categories. It helps you stay objective.
- Hybrid skills (skills that combine both hard and soft skills, like customer service).
- Transferable skills (skills that apply to any job, no matter the level or industry).
- Job-specific skills (skills that apply only to certain positions).
- Identify reskilling and upskilling courses you may need to close your skills gaps and brush up on skills.
- Keep up with the trends by observing where your industry is heading and consider the complementary skills you need to enhance your effectiveness or add value to the work.
- Lean on your existing network and talk to those inside and outside your industry. Make connections, learn more about potential opportunities, and what skills you may need.
- Consider contracting, if only for the short term. Many organisations prefer working with consultants or contractors during tough economic times.
- Act fast. Get your CV to as many prospective employers as possible while you upgrade your skills. Consider organisations with an active skills and development programme so you can develop new skills while at work.
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