As the local economic terrain gets more rugged in the 2017/18 financial year, more firms are downsizing, with 36 private companies having written to the Ministry of Labour about their intention to lay-off employees.
The latest development follows reports that the number of employees being laid-off has been increasing over the years, with 1 500 workers laid-off between June 2015 and 2016, while 3 000 faced lay-offs in 2016/17.
Companies that have already notified government include those in manufacturing, banking/finance, agriculture, energy and mining and import and export, according to the ministry.
The Malawi Congress of Trade Union (MCTU) has since warned that government is sitting on a time-bomb if it does not intervene urgently.
The ministry’s spokesperson Christina Mkutumula said she could not disclose the specific companies for ethical reasons.
According to her, the number of companies downsizing could be more than the 36 applied in 2017/18.
“The figure could be more because there are some companies that do it quietly, without informing us. Way back, the ministry developed a policy requiring companies to notify us whenever they want to downsize,” said Mkutumula.
She said in 2016/17, 33 companies applied to downsize while in the year 2015/16, 19 companies applied, meaning the job market is shrinking instead of expanding to absorb job seekers that include university graduates.
This is against government’s goal to create more jobs to improve the economy.
Malawi Economic Justice Network (Mejn) has said the increase in lay-off signals poor economic performance in general.
Mejn executive director Dalitso Kubalasa, in an interview yesterday, said the fact that more and more companies are expressing intentions to downsize indicates that the country is going through economic hardships.
“Times are tough. We shall continue to face these hard times, and coupled by power outages, it is one big blow to production and, obviously, companies cannot afford to keep more workers.
“It can be costly if companies, be they in small, medium or large scale, have to keep a large workforce when production is low due to the worsening power outages. The option, though regrettable and bad for the country, is to lay-off,” he said.
MCTU secretary general (SG) Denis Kalekeni said, in an interview yesterday, government should not ignore challenges the companies are facing.
He said if more people were laid-off and could not be absorbed by the industry; it was likely that they would start engaging in criminal activities government would not manage to contain.
“It will be really bad if we come to that catastrophe. The private sector plays a greater role in shaping the country’s economic development.
“If companies downsize, it means low collection by government of Paye [Pay As You Earn] taxes, low collection of VAT [value-added tax] as more and more people would no longer afford to buy their basic needs, and a lot more losses,” Kalekeni said.
The MCTU SG said no investor would want to invest in a country where other companies are downsizing or closing shop altogether, advising government to move in quickly and avert disaster.
But Finance Minister Goodall Gondwe said government would try to apply measures to minimise lay-offs by private companies.
“We will always work hard as government to stimulate more employment. We want companies to employ more. We will try to make them employ more, for example, by reducing taxes private firms pay to government, I’m not saying we are going to do that, but that is one way we may take to mitigate the problem,” he said.
Gondwe said as more and more people are graduating from universities, the job market should be expanding as opposed to shrinking.
But MCTU said it was government’s responsibility to ensure lay-offs are minimised by introducing incentives, such as taxes to companie.
Kalekeni said it was bad for a small economy like Malawi’s, already riddled with high levels of unemployment, to have companies applying to downsize.
Economic expert Professor Ben Kalua of Chancellor College, a constituent college of the University of Malawi, said in an interview that laying-off of employees signifies a number of things, including technological upgrade.
“There are new technologies coming in and companies are investing in that while laying-off employees in response to that technological upgrade. Of course, on the other hand, economic hardship the industries are facing could be another contributing factor,” he said.
Kalua said the other factor could be low demand of local produced products, owing to competition from imported products, which could be cheaper.
The Ministry of Labour spokesperson said when companies apply to downsize, the ministry scrutinises the reasons given.
“The big challenge we have observed is that more companies are going through economic challenges. They cannot afford to maintain the staff they have. This is all the more reason the Ministry of Labour encourages skills development.
“We would want to see more people opening up their own businesses, instead of depending on employment,” she said.
Last year, then deputy labour commissioner Wafwire Msukwa told our sister newspaper Weekend Nation, that there was nothing the ministry could do to stop lay-offs as companies wanted to survive.