Analysts see Zimbabwe’s retail sector recording significant sales growth buoyed by an increase in aggregate demand resulting from a salary increment awarded to civil servants by the treasury.
Aggregate demand is the total amount of goods and services demanded in the economy at a given overall price level and in a given time period.
A market report prepared by the Tetrad Group says a salary increment awarded to government workers should stimulate demand for fast moving consumer goods.
Biti also increased the tax-free threshold on bonuses to US$500 from US$400, a development also widely expected to increase disposable incomes for public workers.
Growth in the retail sector is expected at a time when the banking sector — whose deposits have been gradually increasing — is on a campaign to restore confidence in the sector.
Treasury has projected distribution, hotels and restaurants to contribute 6% to the Gross Domestic Product.
“The substantial increase in government salaries — amounting to more than 50% — will without doubt increase aggregate demand in the economy because government currently employs the highest number of people in the economy,” the Tetrad report reads.
“The increased disposable incomes will be a major boost to retailers and indeed their suppliers. In addition, the wage increase in the public service is likely to spark wage increases in the private sector.”
The banking group, however, warned that plans by President Robert Mugabe to call for elections next year following growing animosity within the coalition government could raise uncertainty among business.
“The major threat in 2011 is the prospect for an election. With no doubt, the polls will introduce a wave of uncertainty which is bad for businesses. The elections, however, are unlikely to be as detrimental to business as in 2008 because the Zimbabwe dollar is gone, which means inflation will not go through the roof and in addition the threat of price controls is much less,” the report said.
CZI president Joseph Kanyekanye said business was “generally” not ready for a poll.
“Generally business do not like elections because when they do happen they take away our time and generally productivity suffers,” said Kanyekanye in an interview with businessdigest earlier this week.
“My idea is that if the GPA can function, then clearly we will be content with that for some time. But if it shows the signs that we are seeing now where it looks like things are not functioning well and there is some sort of dissonance, then clearly an election may be the ideal thing provided it is done in a manner that the outcome is respected by almost everyone.”
Zimbabwe Congress of Trade Unions president Lovemore Matombo, however, said that the salary increment would do little to cushion civil servants from the cost of living.
“We are greatly disappointed by the proposed US$225 monthly tax free threshold announced by the minister,” Matombo said. “We expected him to announce a figure close to the current poverty datum line currently standing at US$487. We have argued that as long as workers have more disposable income, it also increases aggregate demand.”