JOBS are key to recovery

2009-12-28 06:59

WHAT is the combination of numbers that will win the first Lotto

jackpot of the year? What will the weather be like tomorrow?

If you think these questions are difficult to answer, try

forecasting what will happen to jobs over the next 12 months.

The way the local economy has gone means that only two views are

certain: that the recovery in manufacturing and the continued buoyancy in the

construction sector and the global economy hold the key to what happens to


Global outlook

Manufacturing and construction have been swimming against the tide

of job losses this quarter in a year in which 1.2?million people have lost their


Though the local economy limped out of the recession in the third

quarter when it grew 0.9%, the impact on jobs will depend on how the global

economy performs.

“If the global recovery continues to gather pace both the mining

and manufacturing sectors should fare better,” predicts Nedbank chief economist

Dennis Dykes.

“Export sales are likely to lead the recovery in these sectors

while local sales are expected to lag before picking up some pace towards the

second quarter of 2010.”

Consumer spending

But a spike in consumer spending is needed if the recovery in the

manufacturing sector is to be sustainable. However, cash-strapped and

debt-ridden South African households are not expected to open their wallets

until well into 2010.

Investec economist Kgotso Radira believes continued job cuts and

weak consumer spending could curtail recovery and possibly push the economy back

into a recession on a technical basis for one quarter.

Despite a 550 basis point reduction in interest rates by the

Reserve Bank since December last year, consumer spending is still under pressure

while business liquidations continue to mount.

Football fever

Business Unity SA deputy chief executive Raymond Parsons believes

that the recovery will be slow but that the 2010 Soccer World Cup should support


“Spending related to the 2010 Fifa World Cup and tourism and tax

income generated will support the recovery,” he says.

Diversified industrial firm Barloworld, which has exposure to

sectors such as mining, construction and motor retail, expects a strong economic

recovery to materialise in the middle of next year.

“Things will be difficult until March 2010. I think future interest

rate cuts could provide the economy with a boost but those cuts would have to be

balanced against inflation targeting,” says Barloworld chief executive Clive



Two of the major concerns going into next year is the price of

electricity and whether Eskom can guarantee electricity supply to


Eskom has revised its annual 45% tariff increase proposal for the

next three years to 35%.

The tariff proposals have raised fears that they will push up the

operating costs of businesses, sparking more retrenchments.

It is also feared that consumer inflation, which dipped below the

3% to 6% target range for the first time in more than two and a half years, when

it slowed to 5.8% in November, could once again run rampant, forcing the Reserve

Bank to hike interest rates when the economy is still fragile.

High electricity tariffs and oil prices trigger second-round

inflationary effects, where the initial increase in their price results in the

prices of other products, such as food and clothing, also rising.

Jobs forecast

All this means that jobs will remain far from certain.

Jimmy Manyi, the labour department director-general, says even if

the economy were to grow over 2% next year the capital-intensive nature of South

African industries is a constraint on job creation.

“This is reinforced by globalisation, where it is the high-skill,

capital-intensive export industries that benefit most,” he says.

A survey conducted by employment services firm Manpower SA has

concluded that there will not be massive employment creation in the first

quarter of 2010.

About 68% of the 750 employers interviewed by Manpower SA expect no

net change in their total employment in the first quarter of next year,while 22%

forecast an increase in hiring.

Auditing firm Grant Thornton forecasts that the 2010 World Cup

football festival will leave a legacy of 106?824 sustainable jobs, many of which

will be in the tourism ­industry.


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