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.<\/p>\n
Almost 6,000 jobs are at risk as companies including Telkom SA SOC Ltd, the country\u2019s largest fixed-line operator, and Walmart Inc\u2019s local unit Massmart Holdings Ltd plan to reduce their headcount after slumps in earnings.<\/p>\n
That\u2019s after Sibanye Gold Ltd cut positions at its Marikana operations as part of restructuring plans and Glencore Plc issued a notice of possible reductions at its Rustenburg ferrochrome smelter.<\/p>\n
If realized, 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.<\/p>\n
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.<\/p>\n
\u201cLabor 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,\u201d said Miyelani Maluleke, a senior economist at Absa Bank Ltd.<\/p>\n
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\u2019s actions are not helping. In addition to a lack of urgency in implementing policies that\u2019ll boost growth and convince businesses to invest and expand, the state and its companies are also reducing workers.<\/p>\n
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 labor unions, the restructuring of power utility Eskom Holdings SOC Ltd, which has billions of dollars of debt and a bloated workforce, will lead to job cuts when it eventually happens.<\/p>\n
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.<\/p>\n
insufficient economic growth. Since 2015, population growth has outpaced growth in gross domestic product every year.<\/p>\n
That means the economy \u201cdoesn\u2019t even begin to scratch the surface of what is required in terms of jobs for new entrants in the labor market,\u201d Maluleke said.<\/p>\n
\u201cAs a result I think you\u2019re going to see the (un)employment rate grow.\u201d (sic)<\/p>\n
South Africa\u2019s economy hasn\u2019t 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.<\/p>\n
The economy needs sustained GDP growth of 2.5% to 3% to stabilize and to reduce the unemployment rate, Maluleke said.<\/p>\n