The South African Chamber of Commerce and Industry (Sacci) has warned of possible stagnation in the labour market in the next six months as a majority of companies halt recruiting due to deteriorating trade conditions.
Sacci yesterday said the October 2023 trade environment survey revealed that the sector was facing increasing pressure, with both current and anticipated trade conditions receiving negative evaluations.
According to the survey, merely 35% of respondents expressed positivity regarding current conditions, while 53% were hopeful for improvements over the next six months.
However, a significant majority of respondents (56%) perceived the present trade conditions to be worse than those in October 2022.
Sacci said at least 70% of respondents also noted a decline in sales volumes, while only 32% reported an increase in new orders.
This was in spite of input costs showing some signs of relief albeit subdued demand restricted the escalation of sale prices.
This has raised the anticipation that inflationary pressures will further ease with a less stringent monetary policy.
Sacci economist Richard Downing said bleak expectations had also dampened the mood, resulting in a somewhat subdued Black Friday, with spending primarily focused on semi and non-durable goods.
Downing said despite the current constrained trade conditions, the expectations for the next six months, which fall within the scope of the survey, continued to support a positive outlook for businesses.
Downing cited the new vehicle sales, which were under pressure, negative retail trade volumes, whereas foreign trade is exerting a positive influence on the economy as some of the reasons for the depressed conditions.
However, he said the growth in inbound tourism has had a positive impact on trade conditions, particularly within the small, medium, and micro-enterprise (SMME) sector, adding that nurturing foreign trade relations was of utmost importance given the role it plays in the trade environment.
“Respondents continue to face limitations on activity due to constrained electricity supply. However, business resilience and adaptability have facilitated the exploration of alternative solutions. Marketing has emerged as an additional challenge in recent times.
“Respondents have also expressed concerns about the poor state of the investment climate and the negative impact of being on the grey list, which has undermined global perception. Instances of corruption and lawlessness have made even divestments a challenging endeavour.
“The restricted trade conditions have adversely affected employment opportunities within the sector, with only 35% of respondents having hired new staff in October. Nevertheless, 45% of the respondents are considering the possibility of recruitment over the next six months.”
This comes on the back of South Africa’s easing unemployment rate which dipped slightly by 0.7% and printed at 31.9% in the three months to September as 72 000 new jobs were created.
Mining and manufacturing sectors recorded the most job losses in the quarter between July and September, 50 000 and 35 000 respectively, due to the ongoing energy crisis and logistical challenges.
The mining industry has already started feeling the pinch of deteriorating conditions and some of the country’s biggest mining houses have started to shed jobs at an alarming rate.
Sibanye-Stillwater has initiated a Section 189 process at its troubled Kloof 4 shaft which has placed about 3 000 jobs at risk, South Deep mine is set to retrench 1 100 employees, Glencore is also retrenching about 200 workers as Transnet woes and lower coal prices bite, Anglo American will cut about 140 jobs, whilst Impala Platinum has also offered voluntary job cuts in a bid to cut costs as prices for the metal fall.
North-West University Business School economist Professor Raymond Parsons said the lagging mining and manufacturing sectors clearly bore the main brunt of the chronic Eskom load shedding on their economic activities.
Parsons said energy security and job security clearly remain interdependent in South Africa.
“South Africa needs economic growth of at least 3% to significantly cut unemployment in the medium term, much more than the modest 1% -1.5% projected in the recent Medium-Term Budget,” Parsons said.
“To make a big dent in the still high structural unemployment requires that the pace of economic reforms, growth-friendly policies and infrastructure projects need to be expedited.
“For as long as the labour force growth continues to exceed net job creation, much higher inclusive economic growth is needed to rapidly reduce unemployment in South Africa.”