JOHANNESBURG, 15 OCTOBER 2020 – The quarterly employment statistics (QES) data released today by Statistics South Africa (Stats SA) runs counter to the Government’s economic recovery plan, which needs all productive hands on deck in order to ensure success, Steel and Engineering Industries Federation of Southern African (SEIFSA) Chief Economist Michael Ade said today.
According to the QES data, the broader manufacturing sector, of which the metals and engineering (M&E) sector forms an integral part, lost 8.2% of total employment, comprising an alarming 100,000 jobs in June 2020 as compared with June 2019. There was also a corresponding decrease on a quarterly basis, with manufacturing employment decreasing by 85,000 jobs or -7.1% in quarter two when compared with quarter one.
Dr Ade said the data showed that the M&E cluster of industries had felt the double whammy of the COVID-19-induced economic lockdown and stagnant economy, as its sub-components had recorded the biggest decrease in job numbers. He said there were also decreases in employment in the basic metals, fabricated metal products, general machinery and equipment, and transport equipment sub-sectors.
The worrying trend was compounded by contemporaneous decreases in employment and business activity in important industrial sectors with high interlinkages, such as the mining and construction sectors, which both recorded job losses of 12,000 employees and 111,000 employees respectively, in June 2020 as compared with June 2019, he noted.
He said the decline in job numbers was expected for a plethora of reasons. These included the fact that the GDP figure published earlier last month for the second quarter of 2020 revealed weaker-than-expected domestic growth relative to quarter one, as local manufacturing production and sales dipped amid a generally poor business expectation following the COVID-19 storm. He said given the slack in economic activity and poor inventory turnover for businesses in manufacturing, the decrease in employment for the same period was anticipated and highlights the negative effects of subdued domestic demand conditions on jobs.
Dr Ade said a distortion in supply chains and an increase in operational expenses and intermediate input costs for businesses has made it even more difficult to sustain jobs. As a result, companies were forced to retrench workers and offer voluntary severance packages.
He said the situation was compounded by the persistent lingering of the coronavirus pandemic regionally and globally, with extended implications for the intensity of domestic business activity and greenfield investment decisions by foreign and anchor investors.
“The concern is that as companies continue to struggle with cashflow challenges, with no delineated implementation plan regarding the novel economic recovery plan in sight, and amid the on-going coronavirus pandemic, it is hard to forestall an immediate end to the trend of poor employment numbers in the short-term.
“The galloping unemployment scourge will, no doubt, have extended socio-economic consequences as the increasing number of unemployed expend their severance packages and unemployment stipends from the unemployment insurance fund,” he said.
Dr Ade said while commendable efforts were being made by policy makers on paper to curb unemployment and reduce difficult business conditions, there was invariably a gap in co-ordinating the activities of the relevant Government departments or agencies, resulting in delays in implementation. The anticipated lag effects were compounded by unforeseen costs to businesses, also impacting negatively on confidence levels.
Dr Ade said despite these challenges, there remained a need to continuously improve business expectation and business confidence by engaging with key stakeholders, including rating agencies, on how to map a sustainable turnaround strategy.
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