Managers in line of fire as firms slash costs

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Other companies could follow suit as economic growth continues to disappoint and retail sales remain muted.

Later this week‚ data on retail sales are expected to show they grew at their slowest pace in more than two years in August.

More than 10% of Pioneer's workforce of 12‚000 would be put on early retirement‚ retrenched or redeployed to lower-paid jobs‚ said the company‚ whose brands include Bovril and Weet-Bix breakfast cereal.

Pioneer could not comment further on Monday because it is in a closed period with the JSE ahead of their results.

Until now‚ blue-collar workers have borne the brunt of the recession. But growing union militancy‚ and government and trade union resistance to further job cuts‚ mean employers are now looking within the ranks of well-paid head office staff to cut the fat needed to boost bottom lines.

In August‚ Pick n Pay began a round of voluntary retrenchments focusing on its head office and regional head offices‚ in a bid to cut operating costs.

Many more middle and senior managers in South Africa could face the axe if economic conditions do not improve and if union militancy increases‚ South African Chamber of Commerce and Industry CEO Neren Rau said.

"In terms of our interactions with our members‚ it definitely seems that there are retrenchments under way at other companies that are being dealt with on a more subtle and sensitive basis‚ both to protect themselves as well as to try and ensure some opportunities for those who will have to be retrenched."

It was possible that job cuts were also an indication "of the challenges experienced by companies in dealing with unions‚ which are placing enormous pressure to improve the working conditions of lower-level employees".

"There would be severe adverse reactions if companies had to retrench at those levels. That's why companies are now turning to middle and senior management‚" Rau said.

Last week‚ the World Bank said South Africa's labour relations environment was holding back growth‚ and pinned the country's slowing growth on trade unions and the paralysing strikes that have hurt various sectors including mining.

"People don't understand how dire this is. We must view this in a very severe context ... as a high risk for our economy when this type of activity starts to happen. My fear is that government and labour take this lightly‚" Rau said.

While retrenching a few senior managers could result in similar savings to the retrenchment of a large number of unskilled workers‚ "South African managers are very highly regarded and rated‚ so companies could lose strong-performing managers to competitors or to companies outside (SA)".

Vunani Securities analyst Anthony Clark said more food producers were likely to consider cost-cutting exercises as "every major food company has taken a knock"‚ mainly due to "a weak consumer". Companies targeted middle management first‚ "because you don't want to cut production staff as that's where all the militant unions are".

Independent labour consultant Tony Healy said the long-term savings from cutting middle management positions over blue-collar workers "are far greater‚ and that's undoubtedly a factor that has influenced Pioneer Foods".