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“Take this job and shove it” - South Africa’s retail majors shoot warning flares into the post-pandemic sky

19 June 2020 Gareth Stokes

South Africa’s retail majors have fired the first shots in a war for employment that will likely dominate the economy for years to come. They are following the script written by Business for South Africa, National Treasury, and countless economic commentators that reads: “Double-digit economic contraction and a couple million job losses through 2020 and 2021”. Anyone still doubting the impact of pandemic on the domestic economy will have been woken from their dreamlike slumber by recent headlines.

Blood on the workplace floor

“Edcon forced to start retrenchment consultations” announced Fin24.com, confirming that the owner of Edgars and Jet stores has sent section 189 retrenchment notices to 22 000 workers. The clothing retailer had its back to the wall before the pandemic; but like many local businesses, has experienced the 90-day national lockdown as the proverbial straw that breaks the camel’s back. The group’s business rescue practitioners have indicated that the only saving grace, and then only for a portion of the total workforce, would be for the ailing fashion retailer to receive a binding offer for its purchase. 

Fashion retail is just one in a long line of sectors that are dusting off the section 189 forms. “Sasol signals job cuts” laments Daily Maverick; “ArcelorMittal South Africa plans job cuts following pandemic hit” reports Reuters.com; while BusinessTech.co.za unpacks “pay cuts, retrenchments, and closures” in the hospitality sector. Even the previously untouchable state-run broadcaster, SABC, is in on the act, with a promised 600 cuts. A jobs blood bath has been forecast; and a jobs blood bath is exactly what we will get. 

Another of the country’s retail stalwarts, Massmart, which owns popular brands Builders Warehouse, Game, and Makro has warned of earnings decimation following is inability to sell general merchandise under level 5 of the country’s coronavirus alert system. The group’s outlook was further dampened by an alcohol prohibition that continued through level 4. Massmart is on record that it ‘lost’ more than R2.3 billion in liquor turnover during March and April 2020, while total group turnover for the three months to end-May 2020 are R4,6 billion down on the comparable period in the prior year. 

Double-whammy assault on earnings

The unnatural double-whammy of lockdown and pandemic came hot on the heels of a R1 billion loss for 2019. According to the latest Massmart trading update: “Excluding the impact of the COVID-19 lockdown, we expected the loss and headline loss would have been slightly better than the same period last year”. Massmart has already scuttled Dion Wired to try and remain afloat a little longer; but pandemic or not, this retail Titanic is taking on water. 

Government is painfully aware of the looming unemployment Armageddon; but has limited resources to stem the tide of job losses taking place across all sectors of the economy. On Thursday, 17 June 2020, during a virtual question and answer session to the National Assembly, President Ramaphosa observed that government’s focus post-pandemic would be to create employment and protect current jobs. “We will [do the extraordinary] by embarking on a number of initiatives that will be aimed at creating jobs … some of those will be expanding public employment, increasing investment in public infrastructure and services, and enabling greater job creation,” said the President. These are noble sentiments; but when government gets involved in such matters the cost frequently outweighs the long term benefits to the economy. 

Billions more to ‘rescue’ airline

South African Airways (SAA) is a case in point. Just how much money does government intend spending to protect the between 1 000 and 2 500 jobs that the business practitioners believe the ‘rescued’ state-owned airline will employ? John Steenhuisen, serving leader of the official opposition, was openly critical of the recently unveiled rescue plan, challenging Ramaphosa on the possibility of a R33 billion bailout to the ailing airline, when the money could be better used to insulate the livelihoods of millions of South Africans. The question went largely unanswered, and we venture that the looming bailout of SAA will go ahead regardless of the myriad counter arguments. 

There was some light in the virtually impenetrable fog of pandemic this week. Global online retailer, Amazon, has plans to employ 3 000 South Africans in a range of customer and technical service roles. “We are thrilled with the talent in South Africa and we are excited to add 3 000 skilled jobs this year in customer service, and to help keep people working during this unprecedented time,” said Andrew Raichlin, director of Amazon Customer Service South Africa, quoted on TimesLive.co.za. These employees will work virtually to support Amazon’s English-speaking North American and European customers. 

Ebrahim Patel, minister of trade, industry, and competition welcomed the move, saying: “The economy will increasingly shift to more productive services and digital technologies, which can provide significant opportunities for young people … the decision by Amazon to locate these jobs in South Africa shows our ability to offer a good value proposition”. Call centre support has long been viewed as an enterprise with potential to create job opportunities in South Africa and further policy finetuning could yield impressive results. 

Suggestions to enable real growth

Top on the wish list for international contact centre operators would be improved telecommunications infrastructure and a softening of labour legislation. Even prior these improvements, South Africa has manged second place for offshore contact centre delivery location, worldwide. This according to the 2020 Front Office Business Process Outsourcing Omnibus Survey conducted by global firm Ryan Strategic Advisory. Commenting on Fin24.com, Andy Searle, CEO of industry body Business Process Enabling South Africa, suggested we could add 500 000 digitally traded service jobs over the next decade. The sector already employs some 260 000 young people. 

Some of the building blocks for a prosperous South Africa are already in place. What needs to happen now is that government unlocks the underlying potential in our economy. They can achieve this by a shift in mindset rather than the economic “reset” our politicians are presently obsessed with. An economic policy that addresses inequality by condemning every citizen to the same level of abject poverty should be dismissed out of hand. Instead, we need to free all sectors of our diverse population to work together to ensure the best possible outcome. A true leader must emerge to forever bury the notion of a nation of oppressors and victims.

 

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