Erich Bloch: Employers’ Immense Dilemma

ZIMBABWEAN employers in general, and those in the manufacturing sector in particular, are being confronted by an intensifying dilemma.

It is very rare for an employer to be arrogantly dismissive of employee concerns, and almost all employers strive to address those concerns as well as they can.

Whilst in some instances this is primarily motivated by humanitarian considerations, for most it is due to the recognition that employee efficiency and productivity is markedly enhanced when the employee is not continuously concerned, and often depressed, by diverse worries and pressures.

Thus, the greater the employees’ peace of mind, the higher their morale and the more satisfied they may be with their life.

This is beneficial for the employer, for commensurately greater is the output of the employees and the higher the quality of that output.

However, within the present Zimbabwean economic environment employers are finding it increasingly difficult, and usually impossible, to sufficiently address the many distresses that prey on the minds of their employees.

The first and most important key issue is that of remuneration. Never in history has any populace been subjected to such cataclysmic inflation as that which now impacts upon all Zimbabweans.

Although the Central Statistical Office has not released any Consumer Price Index (CPI) or inflation data since July 2008, many private sector authoritative estimates and calculations are available. Amongst such data recently released, the Cato Institute places month-on-month inflation for November 2008 at 79, 6 billion per cent!

As difficult as it is to absorb the realities of inflation of such catastrophic magnitude, the actual situation is even worse, for that level of inflation was not exclusive to that month.

Professor Steve Hanke, who is professor of applied economics at Johns Hopkins University in Baltimore, USA, and a senior fellow of the Cato Institute (a renowned Washington-based “think tank”) has computed that Zimbabwe’s annual inflation rate approximates 6,5 quindecillion novemdecillion per cent (which is 65 followed by 107 zeros!). On the basis of that inflation calculation, the cost of living in Zimbabwe is now doubling every 24, 7 hours!

For employees to maintain their standards of living, they require increases in salaries and wages commensurate with the real rate of inflation, and more and more that is being demanded.

Almost every wage negotiation between trade unions and employer representative bodies is founded upon employee demands for wage increments at least commensurate with prevailing inflation. 

Such demands are wholly understandable for, in the absence of inflation-aligned incomes, the employees are unable to meet their basic living expenses.

They are confronted with continuously escalating increases in rentals, transport charges, costs of basic foodstuffs, education fees, health care expenses, costs of utilities and much more. Life for the average Zimbabwean has become a continuous juggle between progressively more and more limited resources and endlessly rising costs of sustaining themselves and their families.

But employers are faced with the insurmountable constraint of their revenues being insufficient to fully address employee demands. They are victims of the same inflation that afflicts their workers. All operational costs constantly surge upwards, and yet cannot be wholly incorporated into increasing sale prices.

Those who manufacture for export markets must determine selling prices at levels that are competitive against the prices of like products supplied by manufacturers in less inflationary environments, failing which export market competitiveness is lost and sales are not forthcoming.

Insofar as production for sale within the Zimbabwean market is concerned, the manufacturer is subject to the constraints of the ill conceived, heavy-handed and detached from-reality National Incomes and Prices Commission, which seeks to impose and enforce grossly unrealistic price controls which disregard market realities, and reduce many enterprises to the threshold of operational collapse.

Moreover, the impact of the ongoing hyperinflation creates a constant decrease in market demand for most manufactured products. As a result, the manufacturers have constantly diminishing sales volumes, whilst fixed costs which cannot be reduced despite falling levels of production continuously increase. Consequently, with very rare exception, employers simply do not have the resources to meet the employees’ inflation-driven demands for wage increases.

The impasse between workers and employers in wage negotiations is exacerbated by the fact that as the Zimbabwean economy is increasingly “dollarised”, with almost all goods and services now only being available if paid for in foreign currency (notwithstanding that this occurred progressively outside the bounds of law, for only Foliwars and a few others were authorised by Reserve Bank of Zimbabwe to charge in foreign currency), so employees seek foreign currency remuneration.

 
The dollarisation of the economy has provoked most employee representative bodies to press vigorously for wages to be paid in foreign currency. (This has not been an exclusive feature of wage negotiations in the private sector, for in recent months government’s teachers, the defence forces, parastatal employees, other public servants, employees of local authorities and many others have been increasingly pressing for their remuneration to be paid, in whole or in part, in foreign currency.)

In demanding that salaries and wages be foreign-currency based, the trade unions and other worker representatives have contemptuously ignored the fact that employers would be in breach of prevailing law if making such payments, except in instances where the Reserve Bank consented thereto. This consent is contingent upon evidence that the relevant employees possess critical, essential and not-readily-replaceable skills. The negotiations also have no consideration as to whether or not the employers are recipients of foreign exchange.

Hence, as greatly as most employers are desirous of accommodating employee needs, most are unable to accede to them. 

As a result, labour/employer relationships have become increasingly tense, confrontational, devoid of reciprocal understanding, destructive and negative. The inevitable consequences have been an ever-greater reduction in numbers employed, negatively affecting employer operations, the downstream economy, the fiscus, and further worsening the lot of previously employed workers.

Additionally and as a direct result, Zimbabwe’s “brain drain” has expanded substantially, with ever-greater numbers leaving the country in order to seek livelihoods elsewhere so as to support themselves and numerous other dependants. This is creating more and more broken families, with wage earners being outside Zimbabwe’s borders whilst wives, children and other family members remain in the country. The magnitude of the “brain drain” will inevitably also impair the eventual recovery of the Zimbabwean economy.

Most employers are also witnessing lower volumes and quality of production by employees, undoubtedly due to the extent that the workers are victims of economic hardships overriding attentiveness to their employment duties. This further minimises the extent of employer ability to meet employee demands.

Nevertheless, the majority of employers are striving to accommodate employee needs as far as is reasonably possible, without bringing about collapse of their enterprises. In part this is achieved by remuneration increments, and in part by many providing employees transport (or transport allowances) and in some instances commodities such as maize meal and cooking oil.

Until inflation is contained, and the economy set upon a recovery path, employers and employees will have to compromise, co-operate and collaborate to minimise employee hardships, whilst not endangering enterprise survival. If not, there will soon be no economy, and no employment.

BY ERIC BLOCH