JOHANNESBURG, 26 MARCH 2019 – The Steel and Engineering Industries Federation of Southern African (SEIFSA) welcomes the quarterly employment statistics (QES) data released by Statistics South Africa (StatsSA) today, which reflect gains in employment, but the Federation remains concerned about high duress and stress levels which face local business.
The StatsSA data showed that employment in the domestic economy increased by 87 000 quarter on quarter, from 10 064 000 in September 2018 to 10 151 000 in December 2018. However, there were decreases in job numbers in construction (-18 000), mining and quarrying (-7 000) as well as manufacturing (-3 000). SEIFSA Chief Economist Michael Ade said this indicated the quandary generally faced by industrial production and construction.
Specifically, the revised estimates show that the broader manufacturing sector – of which the metals and engineering (M&E) cluster forms an integral part – lost 0,2 percent of total employment (3 000 jobs) in quarter 4 of 2018, with employment decreasing from 1 216 000 in September to 1 213 000 in December 2018. Over a longer time-frame, between the fourth quarter (Q4) of 2017 and the fourth quarter (Q4) of 2018, an encouraging total of 5 000 jobs were created in the manufacturing sector, representing 0,4 percent of jobs gained.
Dr Ade said that despite the slight up-tick in domestic job numbers in quarter 4 (Q4) of 2018, the main concern about high duress and stress level faced by business still remains, underpinned by a plethora of reasons.
“Firstly, the GDP figure published earlier this month for the 2018 quarter 4 revealed weaker-than-expected domestic growth relative to quarter 3. Given the slack in economic activity and poor inventory turnover for businesses in manufacturing, businesses’ inability to sustain existing jobs over time is cause for concern and highlights the potential negative effects of subdued domestic demand conditions on employment.”
Secondly, Dr Ade said a consistent increase in businesses’ operational expenses and intermediate input costs has made it even more difficult to sustain jobs, in the process forcing companies to retrench workers and offer voluntary severance packages. The situation is compounded by the recent power outages, which are both a shock and disappointing since load shedding as a concern is not new.
Dr Ade pointed out that irregular supply of electricity, as one input which cuts across all industrial sectors, is calamitous to the economy. He said the recent load shedding will spook both local and foreign investors even further and possibly influence Moody’s rating decision on Friday.
“With regard to the metals and engineering (M&E) cluster of industries, the effects of load shedding on employment is dire, given the existence of energy-intensive sub-components within the cluster. Irregular power supply feeds into a cocktail of difficulties faced by small, medium and big businesses. For businesses with generators or other uninterrupted power supply devices, the concern has been that of unplanned expenses in keeping the generators running, given the worrisome rebound in fuel prices,” Dr Ade said.
He added that existing evidence shows that the sub-components of the M&E cluster collectively lost over 12 000 jobs from quarter 1 2017 to quarter 3 2018. Alarmingly, this translates to just under 580 jobs lost every month, over a 21-month period, thus painting a worrisome trend of plummeting job numbers between Q1 2017 and Q3 2018.
Dr Ade said employees in the cluster’s energy-intensive sub-components felt the brunt of job shedding during the same period, with basic iron and steel shedding over 2 000 jobs, structural metal products, tanks, reservoirs and steam generators cutting over 4 000 jobs, metalwork service activities losing almost 6 000 jobs and the transport equipment cluster cutting over 1 000 jobs.
“The concern is that with no immediate end to load shedding in sight, the trend of poor employment – which tapered in quarter 4) of 2018 as a result of the gain in employment – is set to continue into 2019, with socio-economic consequences as the increasing number of unemployed people expend their severance packages and unemployment stipends from the unemployment insurance fund,” he said.
Dr Ade said while commendable efforts are made by policy makers to curb the plight of unemployment and reduce difficult business conditions, the anticipated lag effects are compounded by unforeseen costs to businesses, also impacting negatively on confidence levels. Nevertheless, he welcomed the gain in job numbers and highlighted the need to continuously improve on business expectation and business confidence, while also continuing dialogue with key stakeholders, including the rating agencies.