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Matriculants unlikely to find jobs

04 November 2010

The CEO of a major training organisation has expressed concern and warned that ongoing job cuts is harming the capacity of South Africa’s economy to grow and threaten the capacity of matriculants to find work.

Liza van Wyk, CEO of two of South Africa’s largest training organisations, AstroTech and BizTech said, “Globally challenging employment conditions are leading to companies re-evaluating their growth strategies".

"Jobs are conventionally the area where most companies cut costs, but a slew of new research shows such cuts cripple prospects for a company and an economy to recover. You need your best and most talented – who are also probably your highest earners – on the job. To lose them is short-sighted; we will get out of this recession even though it will take longer than first predicted.”

And too, a recent Organisation for Economic Cooperation and Development economic survey revealed that South Africa had the worst rate of unemployment among young people between the ages of 15 and 24 of all countries surveyed.

Van Wyk said local and global experience was showing that those companies that cut in other areas but retained staff and invested in training were easing out of harsh trading conditions faster than those who had slashed staff. “Young people are becoming very demoralised at what they see is a growing lack of opportunity,” she said.

Her concerns have been echoed by Labour Minister Membathisi Mdladlana that youth unemployment is a "ticking time bomb." In a written reply to a parliamentary question, Mdladlana said the situation was so serious that unless swift action was taken, youth unemployment could become unsustainable, putting social cohesion at risk.

A similar warning has been made by the International Labour Organisation which recently warned that employment growth globally would remain stagnant through 2010, and only return to precrisis levels in 2015, at the earliest. The report warned of ˜heightened socioeconomic insecurity around the world.”

It cited cases of unrest related to the financial and economic crisis in at least 25 countries, out of 82 surveyed, in the form of anti-government protests, demonstrations against employers and violent clashes between the authorities and protesters.

South Africa has seen similar unrest. Last year South Africa shed more than a million jobs and so far this year, close to a quarter million additional workers have found themselves without employment. And politicians are warning that joblessness will lead to social unrest.

Van Wyk and Mdladlana have pointed out that government has a range of allowances and tax breaks for companies that do training, they range from apprentice, learnership and internship allowances as (a) form of subsidies to learners while undergoing training. The Training Layoff Scheme offers workers and employers an alternative to retrenchments and has so far helped 6 083 workers.

Government has also provided R11 billion in funds for the Department of Economic Development which has saved and created more than 20 000 jobs, Minister Ebrahim Patel has noted – but it is a drop in the ocean in the face of millions without work.

Patel said there were 10 sectors where jobs could be created including infrastructure, the green economy, agriculture, mining and beneficiation, manufacturing, the knowledge-based sectors, tourism and business services, the social economy, the public sector, and activities directed at economic relations with the rest of the African continent.

The challenges South Africa is facing are global (although unemployment figures here are significantly higher).

In the United States many companies are focusing on cost-cutting to keep profits growing, but a recent International Herald Tribune report noted: “The benefits are mostly going to shareholders instead of the broader economy, as management conserves cash rather than bolstering hiring and production. Harley Davidson, for example (which is showing high profits), has announced plans to cut 1 400 to 1 600 more jobs by the end of next year.

That is on top of 2 000 jobs cut last year, more than a fifth of its work force.”

The IHT noted: "Because of high unemployment, management is using its leverage to get more hours out of workers", said Robert C. Pozen, a senior lecturer at Harvard Business School, in Massachusetts, and the former president of Fidelity Investments.

"What’s worrisome is that American business has gotten used to being a lot leaner, and it could take awhile before they start hiring again.” The IHT quoted David Kostin, chief US equity strategist at Goldman Sachs who said: "Whole industries are operating at new levels of profitability. In the downturn, companies managed to maintain higher profit margins than ever before.”

By next year, analysts expect margins to hit 8.9 percent in the USA, a record high. The difference this time is that companies wrung more savings out of their work forces, said Neal Soss, chief economist for Credit Suisse in New York. Ford has shrunk its North American work force nearly 50 percent over the past five years. While wages and salaries have barely budged from recession lows, profits have staged a vigorous recovery, jumping 40 percent between late 2008 and the first quarter of 2010.

Van Wyk said there were significant warnings here for employees and trade unions, “companies are getting used to improving processes and cutting staff. What it means is that they will increasingly reject what they see as high wage demands and will continue to trim staff, train the best and make more money with fewer employees.

“It calls for whole new ways of thinking from employees and trade unions as well as training organisations. We are increasingly being pushed to provide high level theoretical material and ever-improving practical content so that staff are ever more productive.”


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