Anglo American’s plans to cut down its workforce to nearly a third of the 135,000 people it employs calls for concern especially as the country has been faced with an inordinately high unemployment rate over the past years.
With its current rate reaching 26.7%, unemployment has posed a serious threat to the South African but this could be worsened if the mining company, Anglo American forges ahead with its plan to send home, most of its staff.
BMI Research said in a report released on Friday, that Anglo American’s decision would be a major threat to the gloomy picture of SA’s prospects of reducing its 26.7% unemployment rate.
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In the report titled Mining Layoffs and Public Sector Constraints will Keep Unemployment High, it said aside job losses at Anglo and many other mining groups, many of the government jobs created over the past five years were unable to retain their staff.
Statistics SA’s quarterly labour reports which was released at the end of the 2016 first quarter revealed how public sector jobs rose from 2.7-million, of the total number of jobs in SA, to 3.7-million of total employment over the past eight quarters.
“A public sector hiring freeze will temper further job creation in the sector. Additional measures to constrain the public sector wage bill are unlikely in the near term, especially ahead of the August municipal elections. However, with rising pressure on the government to cut spending or face a credit rating downgrade, we cannot rule out that further steps will be taken thereafter,” the report said.
Stats SA’s recent report showed SA’s unemployment rate soared to a 12-year high and BMI research explained that while the increase in joblessness was due in part to seasonal factors, an uptick in mining sector layoffs and a public sector hiring freeze are likely to keep unemployment near current highs, with potential to climb further. “This underpins our view for a sharp slowdown in private consumption growth in 2016 to 1.0% from 1.6% in 2015, “it said.
With about 72,000 Anglo’s employees based in SA, BMI said its aim of reducing its total headcount from 135,000 to 50,000 over the next three years would be a little bit hard for the country to achieve.
“Anglo is far from the only mining firm faced with making layoffs in SA. With SA’s mining sector struggling with persistent low commodity prices, high production costs and a challenging operating environment — including a recent spate of strikes and rolling blackouts weighing on production — we expect further job losses in the sector.”
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The report also revealed that the sharp rise in joblessness in South Africa was caused by declines in manufacturing, trade and construction sector employment. “We see little scope for a substantial reversal in the months ahead’.
“The manufacturing sector will continue to face persistent structural headwinds in the form of electricity blackouts and labour unrest. Coupled with the weak macroeconomic environment — disincentivising businesses from expanding — and the rising cost of capital, we expect this will weigh on new job creation across a number of sectors, even as the size of the labour market continues to expand.”