South African telecommunications company, Telkom informed trade unions and staff on Wednesday, January 15, 2020, that it will cut up to 3,000 out of its more than 15,000 employees as a result of the company’s recent declining performance.
In a letter seen by Reuters, Telkom revealed that it is struggling with organizational and operational inefficiencies linked to its fixed voice and data services. These services require more staff to install, maintain and remain relevant in the South African market.
Similar to other African-owned telecoms companies, the South African government holds a stake of about 40 percent in Telkom. With the current downturn in the country’s economy, the telecoms company has struggled to remain relevant with a surge in demand for the internet and data, and an increase in the usage of smartphones.
South Africa’s state power utility Eskom, experienced a series of power cuts in 2019 which pushed Africa’s most industrialized economy to the brink of recession. Eskom which generates more than 90 percent of the country’s electricity is still grappling to meet regular power demands because of breakdowns at its coal-fired power plants.
These power cuts and inadequacy in power supply has affected quite a number of businesses in South Africa, especially those highly dependent on steady power supply. Subsequently, some businesses have shut down completely while others are cutting down on expenses and staff.
Earlier this week, Massmart Holdings announced plans to cut up to 1,440 employees and close 34 stores due to unprofitable sales in South Africa. These potentially affected employees will join a host of South Africans in the battle against unemployment. In the third quarter (Q3) of 2019, the unemployment rate edged up to 29.1 percent making it the highest since comparable data began in Q1 2008.
Although the South African government has been slow to procure more power since the electricity cuts escalated last year, President Cyril Ramaphosa at an economic conference in Johannesburg announced that his government will encourage “companies and households that want to generate their own energy.” With the view to restore South Africa’s power sector and struggling businesses, Ramaphosa intends on issuing licenses to private individuals who seek to provide new power sources in the country.
However, till the South African economy stabilizes, Telkom said that it will consider voluntary severance and early retirement packages for employees affected by phase one of the job cuts which will take place between January to April 2020.
Employees from the Openserve and consumer divisions are set to be the most affected during this phase. These include Support employees, Specialists, the consumer unit, the corporate centre, and Operational employees amongst others.
The South African government is therefore saddled with the responsibility of restoring its economy to avoid more downsizing by businesses and an increase in the rate of unemployment which is presently at an astonishing 29.1 percent.
