South Africa has been rocked by news of mass retrenchments this week as businesses continue to feel the effects of a weak economy – forecast to grow at a mere 0.9% in 2020, according to the World Bank.
The country’s official unemployment rate continued to climb in 2019, reaching 29.1% in the third quarter – its highest rate in over 16 years.
This trend is likely to continue into 2020 with both Massmart and Telkom announcing planned retrenchments.
On Monday (13 January) the Massmart Group announced a number of potential store closures and retrenchments at Dion Wired and Masscash stores, as it cuts down on under-performing outlets.
The group said that it recently conducted a store optimisation project that highlighted a number of underperforming stores in its portfolio.
“Consequent to this project the Massmart Group seeks to advise shareholders that Massmart has commenced, a potential store closure consultation process in terms of section 189 and section 189A of the Labour Relations Act 66 of 1995, as amended; with organised labour and other relevant stakeholders,” it said.
“A total of 34 Dion Wired and Masscash stores and approximately 1,440 employees are potentially affected by this process.”
Massmart currently employers approximately 12,000 employees across its group which includes brands such as Makro, Game, Builder’s Warehouse and others.
On Wednesday (15 January), Telkom informed trade unions and staff that it could cut up to 3,000 of its more than 15,000 employees as it struggles with declining performance in fixed voice and data services.
The company said that it is also grappling with organisational and operational inefficiencies linked to fixed voice and data services, which require more staff to install, maintain and market.
“Telkom will continue to consult with the unions, and it is our hope that through considered engagement with the unions, we will come to a mutually beneficial solution,” a spokesperson said.
“Out of respect for our employees, we will share information once we have engaged further with our employees and unions.”
Government and union intervention
While both Massmart and Telkom have already initiated the first phase of retrenchments in terms of the Labour Relations Act, they are likely to face opposition from trade unions, and the government.
Communications Workers Union (CWU) secretary-general Aubrey Tshabalala said that the job cuts at Telkom showed that the company’s senior executive team had failed.
“This demonstrated that the corporate plan of Sipho Maseko and former Telkom chairman Jabu Mabuza has failed,” he said.
He added that the CWU will oppose the planned job cuts, calling on workers to unite against the ‘onslaught’ from Telkom.
The chairperson of parliament’s select committee on Trade and Industry, Mandla Rayi, has also asked government to urgently intervene on the pending retrenchments at Massmart.
Rayi described the retrenchments as ‘catastrophic’ and warned that the cuts would hinder the government’s plans to create jobs.
“It is not ideal to have the government interfere in business, but the severity of the pending retrenchments necessitates that there must be a collaboration of minds.
“Losing over 1,000 job opportunities will be catastrophic not only for job creation, but also for the families of those who will be affected,” he said.
Rayi added that it was ‘not ideal’ to begin 2020 year by laying off workers with no alternative sources of income.
“Such an action, no matter the amount of consultation, will frustrate government’s objectives of creating over a million job opportunities.”
The threat of mass retrenchments is not limited to the private sector, with a number of state-owned enterprises are also facing job cuts.
South African Airways (SAA), which entered into business rescue in December 2019, is set to cut jobs as business rescue practitioners battle to save the company.
In a column for the Sunday Times, Public Enterprises minister Pravin Gordhan said that the liquidation of SAA would have led to thousands losing their jobs, leaving social, economic and financial damage in its wake.
Eskom is also likely to shed jobs in 2020 as new chief executive officer Andre de Ruyter prepares to split the power utility into three separate operating units.
In March 2019, the World Bank warned that Eskom is 66% over-staffed with the company currently employing more than 46,600 people.