Anglo American’s Plan To Cut Workforce Adds To South Africa’s Joblessness Woes

Unemployment concept in tag cloud

Unemployment concept in tag cloud

Anglo American’s plans to cut its workforce to nearly a third of the 135,000 people it employs are among the factors painting a gloomy picture of SA’s prospects of reducing its 26.7% unemployment rate, Fitch subsidiary BMI Research said in a report released on Friday.

The report, titled Mining Layoffs and Public Sector Constraints will Keep Unemployment High, said besides job losses at Anglo and many other mining groups, many of the government jobs created over the past five years were not sustainable.

Statistics SA’s quarterly labour reports show public sector jobs have risen from 2.7-million, or 1.8.8% of the total number of jobs in SA, to 3.7-million, or 23.5%, of total employment over the past eight quarters.

“A public sector hiring freeze will temper further job creation in the sector. Additional measures to constrain the public sector wage bill are unlikely in the near term, especially ahead of the August municipal elections. However, with rising pressure on the government to cut spending or face a credit rating downgrade, we cannot rule out that further steps will be taken thereafter,” the report said.

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Stats SA’s most recent report showed the unemployment rate soared to 26.7%, a 12-year high.

“Indeed, while the increase in joblessness was due in part to seasonal factors, an uptick in mining sector layoffs and a public sector hiring freeze are likely to keep unemployment near current highs, with potential to climb further. This underpins our view for a sharp slowdown in private consumption growth in 2016 to 1.0% from 1.6% in 2015,” BMI Research said.

With more than half of Anglo’s employees based in SA — about 72,000 people — BMI said its aim of cutting its total headcount from 135,000 to 50,000 over the next three years would hit the country hard.

“Anglo is far from the only mining firm faced with making layoffs in SA. With SA’s mining sector struggling with persistent low commodity prices, high production costs and a challenging operating environment — including a recent spate of strikes and rolling blackouts weighing on production — we expect further job losses in the sector.”

Other segments of the economy are unlikely to be able to offset the job losses in the mining sector.

“Indeed, the sharp uptick in joblessness in Stats SA’ s most recent report was led by declines in manufacturing, trade and construction sector employment, and we see little scope for a substantial reversal in the months ahead.

“The manufacturing sector will continue to face persistent structural headwinds in the form of electricity blackouts and labour unrest. Coupled with the weak macroeconomic environment — disincentivising businesses from expanding — and the rising cost of capital, we expect this will weigh on new job creation across a number of sectors, even as the size of the labour market continues to expand.”


Source: Business Day Live

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