Job cuts will depress SA’s limping economy even more

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

Almost 8 000 jobs are at risk as companies including Telkom and Walmart’s local unit  Massmart Holdings plan to reduce their headcount after slumps in earnings.

That’s after Sibanye Gold’s 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 percent of economic activity, slowed to 0.2 percent in the third quarter despite a reduction in the benchmark interest rate.

“Labour market dynamics

- job growth, income growth - are the most important drivers of consumption expenditure,” said Miyelani Maluleke, a senior economist at Absa.

“I worry that if we see more of these kinds of announcements it could further depress household consumption expenditure.”

An economic blueprint that President Cyril Ramaphosa co-authored a decade ago aims to reduce joblessness to as little as six percent 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.–