The integrated communications company said that it needs to retrench as many as 1,000 managers and cut its workforce by almost a third over five years.
“Consultation needs to take place to be careful who is let go of at Telkom. The danger is that too many managers that are critical to Telkom may be retrenched. We’ve already seen quite a few managers leaving through voluntary retrenchment over the past few years,” Dobek Pater, a telecoms analyst at Africa Analysis, told CNBC Africa.
“Senior people and managers at Telkom have been through an evolution of technology over the past 20, 30 years. If they go, memory loss can occur and you don’t have a track record of what actually transpired. It’s a balance of what knowledge you retain and what skills you need. You need to retain the right skills for the future.”
Marius Croucamp, a spokesperson for South African trade union, Solidarity, echoed Pater’s sentiments.
“What is of concern in previous retrenchment processes in Telkom, and there have been several, is that we find many people coming back to Telkom on contract and being paid more than before because they simply need those skills. Telkom needs to get it right. They could get it spot on or it could end up in disaster,” he explained.
“There’s a good consultation process and forums in place and those will be enacted in the next week or two. The CEO has been in contact with the unions and he’s given that undertaking. He’s actually not giving numbers at this point so we will see exactly what they’ve got in mind.”
Telkom, and its chief executive officer, Sipho Maseko, have hired American-based management consultants, Bain & Company, to advise the company on its cost-cutting strategy.
“It’s certainly making manoeuvres in the right direction, looking at significant cost-cutting measures, looking at reducing operation expenditure and capital expenditure going forward, and becoming more competitive. It also needs to look at what types of products it’s going to be putting into the market in the future, what it wants to keep because it has a stock of products that are the ‘bread and butter’ that it needs,” Pater said.
“It depends on what Telkom wants to do in the future, what its strategy is going to be in terms of medium to long-term competition in the market that will dictate the number of people it needs to operate with. Either way, it needs to cut back dramatically as a cost-saving measure but there are other cost-saving measures that need to be taken into consideration apart from just retrenchments.”