Labor recession hits South Africa

By Li Jianmin

JOHANNESBURG, Dec. 8 (Chinese media) -- South Africa is already in a labor recession, and unemployment could rise to 25 percent in the first quarter of 2009, according to a report released on Monday by the South African Trade Union Solidarity.

Up to 32 companies are already retrenching around 22,000 employees, the report said.

Companies hit hardest by the retrenchments are: Ford (800), Arcelor Mittal (200 contract workers), DRD Gold (1,700), Lonmin (5,550 plus 1,400 contract workers), Uranium One (1,013) new car dealers (3,500), second-hand car dealers (1,500), ABSA (1,210) and Mutual Federal (600).

"It is expected that the numbers could still rise drastically," the union said in the report.

"It cannot really be determined how many contract workers are losing their jobs," it said.

The largest group of these workers, namely 11,695, was in the mining industry, and 6,100 was in the vehicle manufacturing industry.

The social impact of retrenchments on communities was incalculable, the union added.

"If it is estimated that every employee supports between seven and 11 dependants, it means that between 150,000 and 200,000 people will be affected by the retrenchments."

Job losses also meant less buying power, which then had a ripple effect on the economy of communities.

"The crisis is here and will only grow," the report said.

"We are concerned about the lack of leadership during the crisis," the union said.

The union said it was drafting a concept emergency plan for the government, based on principles from the Disaster Management Act.

"We hope to send the concept plan to President Kgalema Motlanthe this week. We suggest that such an emergency plan be developed further at a crisis summit chaired by President Motlanthe," said Dirk Hermann, deputy general secretary the union.

A labor recession occurred when the labor market had negative growth for two consecutive quarters, it said.

Unemployment had risen from 23,1 percent to 23,2 percent in the third quarter of 2008.

"Solidarity expects that unemployment will rise to between 23,3percent and 24 percent in the fourth quarter of 2008 and that it could rise to as high as 25 percent in the first quarter of 2009."

The union said it was calling on industries to regard retrenchments only as a crisis measure.

"A company might be cutting 20 percent of costs, but 100 percent of the employee's income is cut," according to the report.

Solidarity said it saw companies retrenching people while still showing profits.

"Companies also make use of the opportunity to get rid of workers easily under cover of the financial crisis," it said.

"Others also use the crisis as an excuse to cut out the company's fat with a view to selling the company or to cut costs now in order to reposition the company again for large profits," Hermann said.

He expected commodity prices to start rising again in 2009.

He warned that companies should be careful not to cut costs to such an extent that they did not have the ability to make the most of the benefits of the upswing phase lying ahead.

According to the report, the cause of the retrenchments was a mixture of local and international reasons.

Locally, factors such as the electricity crisis, the skills crisis, the HIV/Aids pandemic, crime, and the deterioration of the infrastructure had placed the economy under pressure.

Internationally, negative factors included the worldwide financial crisis, limited access to financing, reduction in the demand for and price of commodities, and increased input costs, the report said.