JOHANNESBURG - Further retrenchments are looming at Group Five following the revision by the listed construction and engineering group of its strategy.
Among other things, the group reported last week that it would migrate its construction operations into streamlined, smaller businesses that had a competitive advantage and planned to dispose of its manufacturing businesses “in due course”.
However, Group Five chief executive Themba Mosai confirmed this week that those businesses that did not fit the revised strategy would be exited.
Mosai said this would obviously ideally be through a sale but the group would update the market on that process.
But Mosai conceded that some businesses may need to be closed, which would have an impact on employment by the group, but it would only be able to provide more information once they updated the market.
In the announcement released last week, Group Five said the group’s construction cluster and engineer, procure and construct (EPC) clusters had been evaluated against the group’s revised strategy and the set criteria and businesses that did not meet all three criteria “will be, and have started to be, exited”.
It added that a core focus area for the construction and EPC clusters remained the reduction of corporate and business overheads.
Mosai said the group’s manufacturing business employed about 700 people and it sold this business, the people would be sold with the business because they were key.
But Mosai stressed Group Five could not speak for a potential buyer in terms of their plans after the sale.
The major aim of the revised strategy is to address underperforming operations and achieve the delivery of acceptable returns in a rapidly-changing and challenging market landscape.
The group has already undertaken several restructuring and retrenchment programmes in recent years.
Group Five reported in May this year that it had streamlined the business units in its E&C cluster from 11 to four, resulting in a simplified management structure and a reduction of 13 percent or 149 in the salaried employees in the business.
The streamlining of this cluster formed part of a restructuring by Group Five in February that it confirmed at the time would result in further voluntary and forced retrenchments.
Group Five had by then already slashed its number of employees by 23.5 percent or 2 841 people between June 2015 and June last year.
The Construction Industry Development Board (CIDB) reported last week that the construction industry had shed 140 000 jobs between the first and second quarters of this year and job losses by the industry could total about 240 000 for this calendar year.
Listed construction and engineering group Aveng retrenched about 1 400 people in its financial year to June this year.
Eric Diack, the executive chairman of the group and acting chief executive, said in September an unacceptable operating performance by the group June had led to operational intervention, with fixed overhead expenses reduced by 18 percent or R503m in the year and 1 400 people retrenched.
“Our order books are reasonably good so we are hoping there are not going to be any major retrenchments during the year [ahead],”he said.
The CIDB expressed concern in its latest construction monitor that the forecast decline in real gross fixed capital formation (GFCF) over the short to medium term that would result in job losses over this period.
It also stressed that under spending by government resulted in lost employment opportunities, adding that the total underspend at the end of the 2016/17 by provincial departments against “linear phased budget” amounted to about R1.4bn and by municipalities about R15bn.
This amounted to about 36 000 lost job opportunities, it said.
- BUSINESS REPORT