Telkom is setting up its workforce to fail - TechCentral

Telkom is setting up its workforce to fail

marc-ashton-2-180When used correctly, enterprise development (ED) can be a very powerful tool for facilitating transformation in a sector or supply chain, but the way telecommunications group Telkom is using it to mask retrenchments is simply wrong.

For those who have not followed the story, Telkom is aggressively cutting headcount with the aim to reduce the size of its workforce by 24%.

The plan is to retrench 4 400 people, while another 3 400 will be outsourced or deployed into outsourced service providers. The guise is that these employees will start little businesses of their own and they will then service Telkom.

Simplistically Telkom wins because it doesn’t have to have permanent employees and the associated fixed costs. The “spin” side of Telkom positions it as facilitating entrepreneurship but that’s not exactly what it is.

If you go back to the beginning, you will remember that the thinking behind ED initiatives was to try to break down vertical and horizontal integration of supply chains that had become a systemic result of a relatively closed economy in South Africa.

ED was seen as a way to introduce entrepreneurs — primarily young black businesses — into supply chains and give them the opportunity to get experience working with friendly clients who would help facilitate their growth and give them much-needed experience to grow.

Cash flow, infrastructure and capital were to be provided for people who were serious about starting their own businesses and they would be able to work with established industry players to grow.

Organisations that have done it really well include Woolworths, Massmart and Anglo American, but for context Zimele, the ED arm of Anglo American, was established in 1989 and it certainly wasn’t built overnight.

Failure rates in small businesses are already high — go to 10% of your workforce and tell them they are suddenly “entrepreneurs” is setting them up to fail.

I was chatting to small business expert Pavlo Phitidis from Aurik — a big player in the local ED space — and he made the point that entrepreneurship requires a very specific aptitude. While the idea of supporting “young” entrepreneurs is great, globally the most successful [traditional]entrepreneurs are in their mid 30s to late 40s. The reason they succeed is that they have earned their stripes in terms of industry experience.

Taking “non-core” middle managers and getting them to contract back in a close corporation or Pty Ltd is not going to work.

The second aspect to consider is that businesses receive tax credits for investing in ED programmes. While I can’t say for certain that this is what is happening at Telkom, I hope that management at the company are not using ED credits to facilitate retrenchment. Apart from it being a really poor display of creative accounting rules, one should remember the purpose of the ED credits.

Sipho Maseko

Sipho Maseko

The “Davis Tax Committee: Small and Medium Enterprises: Taxation Considerations, Interim Report” from July 2014 points out that the purpose of the incentive is actually to stimulate youth employment, and specifically people between the ages of 19 and 29.

The report notes: “There is a strong argument for the case that tax incentives for the SME sector should be focused on rewarding or encouraging employment-creation rather than rewarding the business owner.”

It doesn’t help if you’re removing people from the workforce and then setting them up to fail under the guise of “enterprise development”. Then you are simply abusing a system.

Having said that, Telkom CEO Sipho Maseko told Moneyweb editor Ryk Van Niekerk in this interview: “I’m sensing quite a lot of optimism about the future. I think that the staff are beginning to see that if we do the right things, the financial delivery will flow through.”

So maybe I’m wrong.

  • Marc Ashon is MD of Moneyweb. This article was first published on Moneyweb and is republished here with permission

4 Comments

  1. Concerned??? on

    I’m not sure with whom the
    CEO has had his discussions with but I can damn well guarantee you that as one
    of the possible 24% of people, there’s no optimism for the future, only worry
    and concern. Maybe the guys who feel that their job is safe, for now, is
    thinking; ‘maybe this means bigger bonuses with less staff and overheads for
    us!’ The rest of us are wondering how do we make a living and a life for our
    families in a country where work is already scares. Let’s say for argument sake
    that in some alternate universe the company is really sincere with ED, wanting
    to stimulate the economy and create entrepreneurs…
    How long will it be before the ANC government, biggest shareholder in this
    company starts asking questions like, ‘How many new black entrepreneurs did you create? How much of the
    work is being given to whites and blacks?’ You get where I’m going??? I don’t
    have any answers but what I do know is that it feels like some of us are being
    screwed so that someone else can pay for their Ferrari and children’s
    private education…

  2. Greg Mahlknecht on

    When Maseko bought all those shares we all thought wow that’s nice he has optimism for the company, but after all the stuff he’s been doing, I’m beginning to think all he cares about is the price of those shares and will do anything to keep them going up, to hell with the consequences to Telkom, its customers or its employees. He can cash out at the peak and get a new job if Telkom sinks.

  3. Your pen/keyboard name says it all Boet. You should be exceedingly concerned. I left Telkom some years back on a VERP deal and it was just a complete con job and very clumsily handled as well, all they want is for you and your fellow CD’s or Currently Disadvantaged off their HR books and out that exchange yard gate, ASAP.
    You will be cast into the wilderness of the business world pal. Oh, and did Telkom tell you guys what a cut throat world it is out there in the Telecomms sector? No? Well It’s dog eat dog and getting worse as well, especially for rookies. Ask yourself this question first and foremost: Can I afford to buy and run/maintain a good bakkie to do the work required in any enterprise? I suggest you ask Solidarity to get a Senior Apprenticeship training programme going in some very saleable skills such as plumbing (always a winner that trade) electrical repairs or other Hands-On skills because the jobs you CD’s did at Telkom are essentially non-starters out there in the wider world. Sorry guys but ol’ Number Plates Sipho is seeing you off big time with this “Entrepreneur” scam, big time. Even more so if you have already lost the Lotto in the skin pigmentation stakes!

  4. Eric Martinsich on

    Its certainly not about skin colour. I was one of the first casualties in beginning of 2000. I was part of the first negotiations in 1999 when Telkom intended retrenching 12,500 and this was exposed to us via a management staff member. the first lot to go were the labourers in camps and other depots. at the time we were around 64,000. reasons to go was the company must become competitive. The americans already made 5billion profit after floating us on the share market and selling off all the buildings. and so from 200o till now its been survival. pension gone, house gone and marriage gone over these years. I would not be surprised if MTN and Telkom “merges”. One thing I will say to anyone that owns a home and finds themselves in a position not to pay is to rent out the home and find a smaller place until your business or other job is up and running. We survive no matter how tough it becomes.