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Many companies in third round of retrenchments

by: Sapa
18 Jun 2009

Many companies are in their third round of retrenchments as they battle to stay alive, training organisation AstroTech said on Thursday.

"We are seeing a disturbing rise in retrenchments," AstroTech CEO Liza van Wyk said.

According to AstroTech facilitator Celeste Allan, retrenchments increased from December to January and have been on the rise ever since.

"Some companies have retrenched two and three times over the last five months.

"I would estimate that many companies have cut staff by up to 25% and that is industry-wide whether in transport, advertising, manufacturing, mines, IT and even environmental type businesses," Allan said.

Companies were compelled to report the number of those they retrench to the department of labour, but the department's spokeswoman Page Boikanyo said they did not have figures for retrenchments.

"But statistics from Stats SA show a disturbing picture of companies failing the fight to survive," AstroTech said.

Statistics SA had reported that when comparing the first quarter of 2009 with the first quarter of 2008, there were increases of 58,7% in company liquidations and 36,8% in close corporation liquidations.

"Companies are seeing a reduction in business inflow to the extent that it is affecting more than profits it is now impacting on the viability of the business," Van Wyk said.

Allan added that she advised clients to carefully consider retrenchment.

"It is not deemed good reason to retrench simply because a company has experienced a reduction in profits.

"However, in cases where the continued viability of the business is in question, the business may need to look at revenue inflow and restructure the business or reduce the number of employees."

Allan said a lot of companies had tried to adopt an optimistic view.

"But with no upswing materialising and conditions becoming more difficult we are seeing some companies losing the battle to survive.

"I foresee no significant improvement in the business environment this year."

She added that retrenchments had caused productivity to drop and depression to soar in many companies.

"It is getting to the stage where in companies that have had two or more rounds of retrenchments, the staff are now turning around and saying to management 'get this over and done with as quickly as possible'."

She added that even so-called "good" staff were leaving companies that were retrenching.

Labour legislation imposed lengthy processes before retrenchments could be undertaken "and in this climate it is a negative, it needs to be faster because staff become extremely traumatised", Allan noted.

However, companies were in many instances in crisis mode.

Allan said some companies had panicked - "they think by cutting 10 heads they will recover but retrenchment is a sign that management have failed in their management duties and have not correctly assessed the environment for new opportunities which are still there".

Van Wyk said it was important for managers to communicate with staff about the business's real situation.

"They need to let employees know what is happening, this allows employees to come forward and give ideas that will generate more revenue.

"Staff often have more creative ideas than management," she added.
Edited by: Sapa