Eric Bloch: Increasing employer and worker divide

ALTHOUGH very belatedly, Zimbabwe finally set forth on the road to economic recovery in 2009. 

Progress on that road was distressingly slow, but inevitable in view of the debilitated state to which the economy had been reduced over the preceding 12 years, almost wholly attributable to a combination of abysmal governmental policies and gross economic mismanagement.
Nevertheless, real progress was being achieved, with the gargantuan hyperinflation of 2008 being reversed (and in contrast to the zillions per cent annualised inflation in late 2008, deflation of 7,7% being achieved in 2009).  The previously barren shelves of almost all shops were suddenly full of goods, although most of the populace were still poverty-stricken to an extent that they could purchase little of that which they needed. Industrial output rose from 8% of productive capacity to almost 40%.  Mining production increased, and even agricultural output rose marginally. The extent of ongoing increases in number of unemployed diminished. Exchange controls relaxed, and foreign investment began to be forthcoming.
Nevertheless, many businesses continued to struggle to survive. Their working capital resources had been pronouncedly decimated by the 2008 hyperinflation, which had markedly increased the working capital requirements of every business, concurrently with fuelling immense operational losses which eroded such working capital as was available.
Then, in early 2009, the Zimbabwean currency was demonetised, which destroyed most of the residual working capital of the businesses.  Concurrently, many of the enterprises were confronted with a massive escalation in unjust import competition, with Zimbabwe being flooded with vast quantities of textiles, clothing, footwear and other products produced in countries which subsidise their exports at levels far beyond those permitted by the General Agreement on Tariffs and Trade. Other products were gaining unfair competitive advantage by being disguised as supposedly manufactured in Sadc, and thereby qualifying for tariff concessions, but actually produced outside of Sadc.
As a result, despite the economic progress being achieved, innumerable manufacturers and other enterprises were battling to continue operations, one of the resources to which they sought to resort being access, from the money market, to working capital enhancement facilities.  However, throughout the period, that market was in very straitened circumstances, with extremely limited capacity to meet the needs of intending borrowers. What little funding as could be made available was extremely costly, again jeopardising the viability of the businesses requiring that funding. Government compounded the working capital pressures by severely contracting the payment periods of Value Added Tax, PAYE, and other direct and indirect taxes.
Despite these circumstances, there were very many notable indications of continuing progress along the road to economic recovery.  However, with its unmitigated skill at undermining the economy, in February, 2010 government created a crater-sized pothole in that economic recovery road. It gazetted the most foolhardy, disastrous, intensely counterproductive, and economically destructive indigenisation and economic empowerment laws. Not only did it do so with its consummate skill at undermining the economy, but since then it has recurrently sought to prevent even a partial contraction of that pothole, instead repeatedly rejecting the good faith advice of the private sector, and confrontationally reiterating the absoluteness of the laws.
Indigenisation minister Saviour Kasukuwere endlessly and confrontationally states that the laws are absolute.  The result has been a massive curtailment of foreign investors’ interest in Zimbabwe, further minimisation of access to international lines of credit and supplier credit facilities, decimation of business confidence, partial reversal of the economic gains of 2009, and intensifying the jeopardy of many businesses. It has also brought about completely unrealistic demands from labour, war veterans, and others for equity allocations in existing businesses.
Those making such demands include the general-secretary of the Zimbabwe Textile Workers’ Union, Silas Kuveya. His union recently proposed that arrears and wages due by textile companies be converted into equity participation in those companies. He said, and rightly so, that the workers should not “lose out”, stating that “It’s high time that every company owing salaries and wages to workers should turn the salary arrears into shares so that workers will end up with shares in those companies”. Concurrently, he stated that his union was initiating litigation against those textile operators in payment default to workers.
Any rational person must deeply sympathise with such workers, and be conscious of their horrendous circumstances. They leave home in the early morning, without having had a meal, for they could not afford it, walk vast distances to their places of employment, for public transport charges are far beyond their means. They sit all day at their workbenches worrying about how to fund the accommodation, food, utilities, education, health-care and other essential survival costs. At the end of the day they have another very extended walk home to be confronted by hungry, crying children and wives embittered by the appalling family circumstances.
However, as justified as the workers’ concerns and stresses are, the harsh fact is that, with very rare exception, those employers failing to pay prescribed wages do not do so in disregard for their obligations, or out of a lack of concern for their workers’ needs and distresses. It is because they cannot pay that which they do not have. Instead, employers and workers need to collaborate to ensure maximised productivity, minimised operational costs, intense constraint upon losses due to extensive product theft and pilferage, so as to procure eventual business viability as will enable payment of fair and realistic wages and progressive settlement of agreed wage arrears.
The call for equity participation does not resolve the poverty of the workers, or the viability of the enterprises. In the absence of operational profits sufficient to service debt, to pay fair wages, and settle liabilities, the companies cannot declare dividends and, therefore, worker equity participation conveys no meaningful benefits to the workers at this time. In addition, any and all facilities that are, or may be, forthcoming from the money market, now and in the future, essential for the survival, recovery and growth of businesses, are conditional upon shareholder guarantees being given as security for repayment of the facilities. Few, if any workers, have the resources to support such guarantees and, therefore, equity dilution in favour of workers at this time would be a yet further hindrance to accessing funding needed for that recovery as is in the best interests of all stakeholders, inclusive of workers.
The constrained financial circumstances of employers and workers are creating an ever greater divide between them, yet further jeopardising the survival of businesses, restoration of worker wellbeing, and Zimbabwean economic recovery. Efforts of employers, workers, national employment councils, and trade unions should be targeted at minimised confrontation, maximised productive collaboration, and progressive closure of the divide between employers and labour.


Eric Bloch