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JOHANNESBURG, 28 JULY 2020 – The Steel and Engineering Industries Federation of Southern Africa (SEIFSA) is concerned about the latest quarterly employment statistics (QES) data released today by Statistics South Africa (Stats SA), which reflect general decreases in domestic employment as local businesses continue to struggle during these challenging times.

The Stats SA data shows that employment in the domestic economy decreased by 3,000 quarter on quarter, from 10 234 000 in quarter 4 of 2019 to 10 231 000 in quarter 1 of 2020. There were decreases in job numbers in construction (-14 000) and manufacturing (-2 000) as the economic recession deepens and local businesses struggle to absorb negative shocks from distortion of local, regional and global supply chains.

Specifically, the revised estimates show that the broader manufacturing sector, of which the Metals and Engineering (M&E) Sector forms an integral part, lost 0.2% of total employment (2 000 jobs) in quarter 1 of 2020, with employment decreasing from 1 211 000 in quarter 4 of 2019 to 1 209 000 in quarter 1 of 2020. On a quarterly annual basis, between the first quarter (Q1) of 2019 and the first quarter (Q1) of 2020, a discouraging 28 000 jobs in total were lost in the manufacturing sector, representing 2.3% of jobs lost.

“Evidently, businesses continue to suffer from the unintended consequences of the COVID-19-induced economic lockdown, as reflected in the number of jobs lost,” SEIFSA Economist Marique Kruger said.

“Hopefully, companies will be able to turn the corner soon, as the recent composite purchasing managers’ index data shows an uptick in sentiments from purchasing executives and production managers, despite declining demand,” she added.

Generally, stagnant economic activity, capacity under-utilisation and stockpiling due to poor sales by businesses contributed to the deteriorating employment numbers. The dynamics also have the potential to cause more harm in the short term, as companies continue to struggle with cashflow problems with extended consequences on the ability to sustain current jobs, Ms Kruger said.

Prior to the pandemic-induced economic lockdown, local businesses were already under strain due to operational, intermediate input, energy or logistics costs. The COVID-19 pandemic and subsequent lockdown further threw a spanner in the works, compelling companies to retrench workers and offer voluntary severance packages. Despite the subsequent easing of the economic lockdown and implementation of the risk-adjusted strategy last month, allowing for key industrial production (including companies in the metals and engineering sector) to operate, many companies continue to struggle.

“While it is clear that the long-standing challenges that inhibit the economy from absorbing the increasing numbers of unemployed still persist, compounded by both seasonal and cyclical unemployment, there is an urgent need to address issues relating to structural unemployment and skills mismatch between available jobs and available skill levels in the country,” Ms Kruger said.

“A key recommendation is for continuous emphasis to be placed on the need to improve investor confidence and sentiment and to increase infrastructure spending, given its lasting benefits to businesses,” she said.

“There is also a need to boost consumer spending aimed at expanding the domestic economy. Increased derived demand will trigger new investments into industrial sectors with the potential of creating new sustainable jobs across all industrial sectors.”

Ms Kruger said while laudable efforts are being made by policy makers to curb the plight of unemployment and ease business conditions, the full benefits are not always immediate due to the lag effects of macro-economic policies and unplanned costs to businesses as they desperately try various interventions to ensure their survival.

“Despite existing challenges to businesses, we welcome the gains in job numbers in some industries. However, we urge stakeholders to continuously improve on business expectation and business confidence, towards sustained employment,” she said.