Adcorp chief slams job cuts

Johannesburg - South African companies took advantage of the global recession by laying off workers to cut costs, a move that destroyed more than a million jobs even though the local economy was hit by a short downturn.

This is the view of Richard Pike, the chief executive of human capital management firm Adcorp Holdings [JSE:ADR], and powerful labour federations Cosatu and Solidarity, which tried in vain to fend off the massive job losses.

Said Pike: “Companies used the recession as an opportunity to get rid of workers...A lot of companies are automating (replacing workers with machines), outsourcing and offshoring to save on labour costs.”

Gideon du Plessis, Solidarity’s deputy secretary-general, said about 30% of the companies where the union was organising had exploited the recession to retrench workers in a bid to boost profits and put more wealth in shareholders’ pockets.

“When we go through retrenchment consultative processes, we definitely experience that companies use the recession as an excuse to cut workers,” said Du Plessis.

He said companies valued profits ahead of workers’ interests and were insensitive to the country’s objective of creating 5.5 million jobs over the next 10 years to reduce unemployment.

“Though we support the free market system, there is tremendous pressure on companies to satisfy shareholders at the expense of employees and the country,” Du Plessis said.

Cosatu president Sidumo Dlamini also weighed in, accusing business of accumulating wealth during the recession while workers were asked to tighten their belts.

“During the recession, many companies made a lot about their dwindling profits and requested employees not to ask for a high pay to avoid retrenchments.

“The companies ultimately made a lot of money at the expense of the employees’ salaries,” said Dlamini.

South Africa’s recession started in the fourth quarter of 2008 and ended in the second quarter of 2009, but by the time it ended it claimed more than 1 million jobs.

In contrast to the recession that hit the global economy in the early 1990s - brought about by the Russian debt crisis - the South African economy slipped into a recession in the first quarter of 1991 and it lasted for eight quarters until the fourth quarter of 1992.

The South African Chamber of Commerce and Industry disagrees with the view that businesses used the recession to shed jobs.

The business chamber’s chief executive, Neren Rau, said companies had to reduce staff because the economic outlook at the time pointed to a serious downturn.

“They expected worst times to come and they adjusted their resources, human and otherwise, accordingly. We are still suffering and there is no serious recovery in sight,” said Rau.

He said South Africa’s labour market was too rigid and made it difficult for companies to hire workers. He also said businesses were under financial pressure due to rising costs on electricity and fuel, and the planned tollgate system, which will increase transport costs.

“They can’t pass these costs on to consumers to recover their costs,” Rau said.

While companies came under criticism for going too far in cutting jobs, labour unions were also criticised for being too militant when demanding higher wages.

Pike said wage increases needed to be linked to higher productivity, which was not the case at the moment.

“I am quite critical of the role of the unions...The unions are very militant and they are pricing labour out of the market. Business and labour need a mature dialogue to preserve jobs. Right now, there is mistrust between the two,” he said.

Pike said the government needed to establish a voluntary national service programme for the matriculants of 2011 to alleviate unemployment.

He said the programme could absorb up to 500 000 young people who could be deployed in sectors such as healthcare, security and construction.

“It will give young people work experience, dignity, discipline and make them employable,” Pike said.

Pike and Rau said that since the economy was struggling to create jobs, workers needed to accept lower wages to preserve or create jobs.

“We need to allow employers to opt out of minimum wages to enable them to create and preserve jobs. However, this proposal is totally unpalatable to trade unions,” Pike said.

But it appears that unions are prepared to listen to the likes of Pike and Rau.

The South African Clothing and Textile Workers’ Union, a member union of Cosatu, will cut wages for entry-level jobs by 30% to create jobs in the clothing industry, which has for years been ravaged by cheap Chinese imports.