/ 1 August 2011

‘Rising costs could force companies to downsize’

Companies are likely to respond to rising costs by “reducing their labour force”, Azar Jammine, Econometrix chief economist warns.

Jammine was a member of a panel of analysts at a Finlay function on South Africa’s economic outlook on Monday.

Jammine said challenges faced by local companies included steep wage demands and above-inflation wage settlements, as well as rising administered costs such as electricity.

South Africa’s economic growth would depend in the main on global growth.

“What stands in the way of being too pessimistic [about growth] is that emerging markets are growing,” he said.

According to Jammine, poor education, an “unattractive” labour market environment and a lack of attention to promoting small and medium business enterprises were the three main reasons why employment was not improving in South Africa.

Stats SA reported recently that the unemployment rate rose to 25.7% in the second quarter from 25% in the first. — I-Net Bridge