‘Salary increase not the answer’

Industries (CZI).

Business consultant and Zimbabwe National Chamber of Commerce (ZNCC) past president, Mr Luxon Zembe, said at the moment most companies are incapacitated to keep on increasing their employees’ salaries without a corresponding increase in production capacity.

“Right now, capacity utilisation is around 25 percent. So, companies are facing the same challenges as the people are facing and it is true that we must first address the fundamentals of our economy,” he said in an interview.

“You can only give what you have and if you don’t have you can’t give. If companies don’t have money where do you expect them to get the money?” he said.

“If they are not producing where will they get the money to pay more salaries unless they are producing. Unless capacity utilisation increases to 60 percent and above, companies remain constrained.”

Mr Zembe said focus at the moment should not be on salaries but on addressing macro-economic fundamentals, which Government is seized with. Through the Transitional Stabilisation Programme (TSP), Government has since October last year been rolling out comprehensive economic reforms aimed at restoring fiscal equilibrium after years of budget deficits and public debts, which choked economic viability. As a result, Mr Zembe said the economy was at present being affected by issues of high unemployment, supply and demand imbalance, slow growth, trade deficit, shortage of foreign currency and raging inflation.

Another economic analyst and National Business Council of Zimbabwe leader, Dr Keith Guzha, said companies in Zimbabwe were facing severe operational constraints, which reduce their capacity to keep raising salaries.

“I think most companies are in dire financial straits to the extent that any salary increases will create a hyperinflationary environment especially without fixing the fundamentals that have caused this mayhem,” he said.

“Government must channel resources towards production and any surplus to internal demands can then be exported and we earn forex.”

Dr Guzha said the National Competitiveness Commission that replaced the National Incomes and Pricing Commission has failed dismally in its mandate as it has not been practically operationalised at a time when its significance is needed in the economy.

One of the core functions of the commission is to “continuously monitor the cost drivers in business and economic environment and to provide a platform for dialogue between the public and private sector, labour, academia and nonstate actors on the subject of competitiveness,” he said.

“In the absence of an inclusive dialogue led by the private sector, we will continue to see challenges,” said the economist. Both public and private sector workers have been pushing for pay reviews citing the escalating cost of living, which has seen the poverty datum line hitting $2 190 for a family of five in September, according to Zimstat. — @pridesinstinctz