Johannesburg, 16 May 2012
JSE-listed Gijima will trim between 8% and 12% of its R1 billion-a-year staff bill through retrenchments as it faces declining revenue because of lost deals and increasing costs.
The group, which recently lost half an Absa deal and a police desktop contract, currently has 3 080 employees. It says it will trim its “human capital” costs, mostly through retrenchments, but refuses to provide numbers as it still needs to follow a consultative human resources process.
In a statement, Gijima CEO Jonas Bogoshi said changes in the global market, and pricing pressure, means the company has to reassess its business operating model and restructure it to make it relevant. “Our aim is to enhance our business competitiveness.”
Gijima's statement says the ICT industry landscape has changed dramatically and ICT spend globally is under pressure. “At the same time, clients, particularly those in the financial sector, have come under pressure to be even more competitive following global acquisitions.”
Revenue declines
An e-mailed communication sent to staff yesterday morning, which is in ITWeb's possession, reveals the staff cuts are linked to lost revenue and higher costs.
“We have to take into consideration revenue forecasts for the new financial year, the investment required in new service offerings aligned to Vision 2025, and the investment needed to secure the company's sustainable future,” said the mail from the CEO's desk.
The mail says Gijima needs to “optimise our resource capability and utilisation” to remain competitive, “particularly in light of the loss of the SAPS [South African Police Service] contract for desktop computers and Barclays' decision to in-source more than half of our contract with Absa”.
Gijima lost 200 staff members after Absa took half of a R200 million-a-year desktop contract in-house in March and took over employee contracts. At the time, CFO Carlos Ferreira said the group was not in a retrenchment phase.
A Gijima spokesperson says the current retrenchment plans and the March staff move are two separate matters and should not be confused. However, the loss of the Absa deal, which was secured in 2006 and worth R960 million over five years, has hurt the company.
Gijima has also lost part of a R20 million-a-month desktop supply and maintenance deal with SAPS.
Falling behind
In the first six months of the year to December, the company reported results that, while an improvement, were below expectations. Revenue gained 7.5%, to R1.3 billion, and it posted a R28.6 million net profit, compared with the previous R208.7 million loss, which it incurred as a result of the settlement with home affairs.
Bogoshi was not happy with the company's performance as it fell short of expectations. He explained Gijima's new client-centric business model was running four months behind schedule.
Bogoshi explained that the new model involves deep restructuring of the company's operations. It should be completely implemented by the new financial year, which starts in July.
Bogoshi said the optimisation strategy, which involves cutting staff, is part of Gijima's Vision 2025 plan, which it initiated in early 2011, in a bid to become more competitive. “We are already seeing traction of the plan we have put in place.
“We aim to improve our performance and enable the organisation to look for and create new opportunities in the ICT space. We are realigning our service and business offerings to create greater efficiencies and enable the organisation to adapt appropriately to market conditions,” said Bogoshi.
Top talent will be retained and the process will be completed by mid-August, while the business restructuring will come into full effect on 1 July.
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