Retrenchments within the ICT industry are projected to continue this year, but market watchers expect this trend to turn as rightsizing and consolidation within the sector run their course.
Solidarity trade union spokesperson Marius Croucamp calls the current retrenchment wave - generally driven by Telkom's restructuring process - a "massive acceleration" in job losses.
The telecoms giant is in the process of retrenching 4 400 employees through voluntary severance packages and voluntary early retirement packages, and also transfer an additional 3 400 employees to external outsourced providers, or via enterprise development.
However, as talks have deadlocked with labour unions, the company is now moving to a forced retrenchment process. Last month, Telkom said it has been unable to reach agreement with the unions on a process to progress with the critical next step in its multi-year turnaround programme.
In addition, Croucamp says Solidarity expects the other telcos - Vodacom, MTN and Cell C - to continue with further retrenchments, but not on the grand scale of Telkom.
"They will probably continue to cut here or there, but one thing to keep in mind is that they are now cutting very close to the bone," says Croucamp. He adds companies will eventually have to slow down as there will not be any excess staff left to cut.
"In some cases we have seen companies cutting too much, leaving some departments unable to operate efficiently. For instance, Telkom has been aggressively cutting staff in their call centre division; in one case cutting a call centre's headcount from 100 to about 12, leaving it unable to function."
In May, Cell C announced it would shed about 1 000 jobs, while the ongoing MTN strike has seen the dismissal of 300 outsourced contract workers, who were terminated for illegally joining the industrial action led by the Communication Workers Union. Last year, MTN retrenched 476 workers and is now in the midst of another restructuring process in its enterprise unit, but says it does not currently have plans to cut more jobs.
Vodacom is the only telco so far not to have announced plans to cut jobs, but does face top-line pressure, prompting it to implement a cost containment programme.
"I don't think we're finished yet. The ICT industry has been cutting jobs for the last three years - with Telkom obviously being the big one. We do expect the other telcos to also continue cutting, but not as much," says Croucamp.
Nature of the industry
Ovum senior analyst Richard Hurst says it is fair to expect further retrenchments in the sector this year, considering the continuing market consolidation and the nature of the industry.
However, Hurst says it is also likely retrenchments will slow and the market may even turn to hiring once some of the market dynamics are worked out.
"There has been a lag that's developed in the market, with companies still recovering from the effects of things such as mobile termination rates, but there should be new things and services coming, which will drive up the [employment] figures.
"That should certainly take up a lot of the slack that has been created in the market."
Hurst also points to another factor expected to slow down retrenchments within the industry. "Companies are reaching levels where there is little left to cut," he says, adding a certain level of rightsizing might still continue via the outsourcing of non-core services.
Meanwhile, BMI-TechKnowledge analyst Brian Neilson believes retrenchments in the sector are likely to continue for some time still. "It is the nature of the industry - it is mature and now we are faced with the over-the-top phenomenon, which means we are not creating jobs where we normally could have been.
"As far as I'm concerned, there is no end in sight to rightsizing, but then again, companies can only cut so much fat until they start cutting into muscle. It's a serious thing and the unions are right to be concerned about job cuts."
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