Gauteng Business News

Send  Share  RSS  Twitter  05 Aug 2010

JOBS: Worsening Jobs Crisis Looms Says KPMG


Recent Gauteng Business News

The full effects of the global recession on South Africa's economy are still being felt, as cost conscious business owners embrace automation more enthusiastically than ever before, a trend that threatens to put thousands of people out of work over the next few years.

That's the warning from Anthony Thunstrom, Managing Director for KwaZulu-Natal of global accounting firm KPMG.

"While economists debate whether our local economy is entering a recession, is already in a recession, is emerging from the recession or is about to go into a second dip, business owners are taking the necessary action to ensure that they are on the best possible footing whatever the outcome," Thunstrom said.

For many employers, this means replacing employees with sophisticated machines and computer systems.

"We're definitely seeing a new wave of automation sweeping South African businesses and industries," Thunstrom said.

"Virtually every company, from family owned to Corporates are looking at some form of cost cutting drive or cost optimization initiative."

Thunstrom said manufacturing in particular has been hit hard by the recession and the impact in KwaZulu-Natal has been substantial.

"The province's economy has been heavily reliant on manufacturing industries which in turn have traditionally been very labour intensive.

"In the past manufacturers may have been prepared to accept the levels of efficiency and productivity that are achievable via a labour intensive approach, but all that has changed as a result of the recession.”

"Add to this the fact that labour has started exerting itself quite aggressively, with demands for increases of between 10% and 15% being fairly common, and the result is that many business owners simply don't want to be exposed to large-scale labour. Thanks to advances in and the relative decreasing cost of automation, they either have increased or are planning to increase their levels of automation"

Thunstrom said that while automating a businesses operation carried a relatively high capital cost, the long term benefits to the company are far greater.

"CEO’s realize that they can shed up to 70% of their workforce. That's a huge saving on an ongoing wage bill."

With the rand being relatively strong at the moment, buying automation systems from abroad has become more affordable than in the past. Since the recession, business owners can now pick up the phone and order systems that they would previously have waited 18 months to recieve and they can have a team installing the machines within weeks rather than months.

"You can't fault the business owner for acting in the interest of the company or its shareholders. But the combined effect of many companies adopting this approach will be a seismic shift in the employment landscape of South Africa and KwaZulu-Natal over the next few years.

"In the meantime, our schools and tertiary institutions continue to produce hundreds of thousands of new job seekers each year. How many of them will realistically be able to find a job in the traditional employment market?"

This, Thunstrom warned, would be the recession's lasting, and to date largely ignored, legacy.

"Until there's a significant upswing in the economy, the traditional sources of employment are simply not going to be able to absorb the number of job seekers. And even then, there will be a lag effect. So realistically we're talking at least several years before we see absolute employment growth return to pre-recession levels."

Thunstrom, and KPMG, believe that one of the solutions to the looming jobs crisis, particularly in the medium term, is to encourage the creation and growth of small businesses.

KPMG, who are not content with theorising about this solution, has been actively engaged in promoting and mentoring promising emerging entrepreneurs in partnership with Absa nationally and Ithala Development Corporation regionally in KwaZulu-Natal.

"These financial institutions are perfectly placed to identify the most deserving small businesses and we are in an ideal position to help these businesses reach their full potential.

"In South Africa, KPMG has around 3500 employees, almost 90% professionals, including chartered accountants, lawyers, engineers and doctors of economics. That's a wealth of intellectual capital and we believe that we can add the most value by harnessing it to help businesses operate optimally and not fail.

"Yes, the full effects of the recession are still to be felt. But we believe there's cause for optimism. There's a tremendous spirit of entrepreneurship in South Africa and we urge other businesses with the right skills to join us in helping unlock its potential," Thunstrom said.

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