Managers in line of fire as firms slash costs

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 that the August sales figures grew at their slowest pace in more than two years.

More than 10% of Pioneer's staff 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 because it is in a closed period with the JSE ahead of the results announcement.

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 reduce costs and boost bottom line profit.

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's chief executive Neren Rau said.

Retrenchments underway

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

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 on employers 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 poor performance 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. My fear is that government and labour take this too lightly‚" Rau said.

"South African managers are very highly regarded and rated‚ so companies could lose strong-performing managers to competitors or to companies outside (SA)," he added.

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 because of the weak consumer situation. He said companies targeted middle management first because they don't want to cut production staff where 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.