South African SMEs Reassess Hiring as 32.9% Unemployment and 245,000 Job Losses Raise Cost Pressure
Updated
Updated · IOL · May 28
South African SMEs Reassess Hiring as 32.9% Unemployment and 245,000 Job Losses Raise Cost Pressure
3 articles · Updated · IOL · May 28
South African SMEs are rethinking whether to add permanent staff or use contractors as rising operating costs and economic uncertainty make hiring decisions more cautious.
Statistics South Africa said official unemployment rose to 32.9% in the first quarter of 2025, while formal sector employment fell by 245,000 jobs.
Lula's Garth Rossiter said permanent hires carry hidden costs beyond salaries, including statutory contributions, onboarding, equipment, software, management time and the risk of a bad hire.
Contractors are gaining appeal for short-term projects, new markets and specialized skills, but Rossiter said core functions still need permanent staff to preserve continuity and institutional knowledge.
SMEs still account for about 60% of employment, and Rossiter said continued demand for growth funding suggests some firms remain willing to expand despite a broader focus on survival.
Is the rise of contracting a sign of SME innovation or a warning of deeper cracks in South Africa's economy?
As SMEs favor contractors over staff, are they trading long-term stability and culture for short-term financial relief?