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- Rising costs and weak demand are squeezing companies and retrenchments are expected.
- But many companies were already downsized during Covid-19, and they have limited options.
- Still, the labour market is in crisis with almost 8 million people out of work.
- For more financial news, go to the News24 Business front page.
Something has to give: businesses are struggling amid load shedding, rocketing input costs and aggressive rate hikes – while demand for their products and services is faltering in a weak economy.
In normal times, this would trigger a shockwave of retrenchments.
But economist and director of Econometrix Azar Jammine believes many businesses already trimmed their staff count close to the bone during the pandemic.
"With Covid-19, we saw significant retrenchments, and I think a lot of businesses used that opportunity to downsize."
So, even with the rising costs, they can't afford to retrench more staff without hurting their operations.
South Africa still has 1 million fewer jobs than before the pandemic, says labour law specialist, Andrew Levy.
"I do see employers continuing with this upward trend of shaking out labour. But is there going to be a sudden nuclear explosion of retrenchments? No, I can't see that," said Levy.
Jammine says many businesses will look for other ways to save costs – or to insulate themselves against the Eskom and Transnet crises, by generating their own power and reducing their dependence on the rail network.
Sharon Pearce, an HR transformation expert at Flux Trends, says many companies have frozen positions following resignations for much longer than before Covid-19. Some jobs have never been filled again or were replaced by contract workers instead of permanent positions.
The trend towards contract workers makes those workers more vulnerable to layoffs. Businesses often look at cutting their contractors' and freelancers' bills first before taking the drastic step of retrenching their full-time workers.
Overall, the country's labour market remains in crisis, with the number of unemployed people in South Africa increasing from 4.9 million to 7.9 million over the past decade.
Jammine says the problem is that more than 400 000 people are entering the job market every year, while not nearly enough jobs are created.
Levy said the future looks bleak only in the long term because of the adoption of artificial intelligence (AI). But even then, he believes SA will be a laggard as usual.
"AI is a long way away because the reality is we are not a sophisticated economy. We're still basically an economy that extracts minerals and raw materials and does some manufacturing. But we're not in the ultra-high-tech sectors," he added.
