HomeBusiness DigestBonus issue dampens SMP spirit

Bonus issue dampens SMP spirit

AT the time of writing Finance minister Patrick Chinamasa and his entourage were in Washington DC, USA, to attend the regular Bretton Woods meetings.

by Christopher Mugaga

Nothing dampens the spirit and expectations of a successful and well structured staff monitored programme (SMP) which Zimbabwe is currently undergoing than Zimbabwean leader Robert Mugabe’s challenge on the noble, but obviously confrontational policy stance of scrapping civil servants’ bonus until 2017.

Indeed, government’s monthly wage bill stands at US$260 million while bonus obligations average US$173 million annually. This is a massive figure by all measures given the size of Zimbabwe’s economy at the moment, the revenue envelope and the debt position (both domestic and external).

As Chinamasa is fully aware that it will take a month of Sundays to completely flush out the ghost workers which had been a permanent feature of the salary service bureau, the most convenient if not immediate option was to freeze the bonus allowances.

This is a treasury boss who knows the gargantuan appetite for spending by his government can only help to push him out of office sooner than later because no fiscal policy he is to announce in the future will make economic sense until he manages the stubborn wage bill which seems to rise well above 40% of the productivity level.

I do not see a single reason why bonus should continue being paid given that those in informal employment within the country who constitutes more than 70% cannot average a salary of US$200 per month whilst at times the labour productivity trend in that sector is almost uniform if not much more superior than those formally employed, civil servants included. This will leave us as economists wondering why the President will consider the issue of bonus payments a right to civil servants.

The 2016 national budget can only be much uglier than the previous one and Chinamasa and his team are fully aware of the implications of attempting either to keep the bloated government size in place or awarding bonuses to an already restive civil service which no longer consider working in government as a prime source of income.

By forcing him to reverse the bonus position, please it is a blatant case of usurping powers from his office and at the same time forcing him to perform economic miracles.

Every time we bemoan the bloated size of the government as well as unnecessary perks in a struggling economy such as new Mercedes benz for every incoming minister or other German or UK model for a senior bureaucrat, this makes it difficult as we are no longer sure if such benefits are also considered a right to the very beneficiaries of these perks.

A bonus by nature is infact an economic reward which is topped to wages and salaries but once that reward is to be given regardless of performance, then it either becomes a wrong precedent for managing finances either in the public or private sectors.
A bonus can never be a right, whatever perspective a right can be interpreted.

The civil servants per economically active populace is too high in Zimbabwe which means the chances of hitting a civil servants for every formally dressed worker in Zimbabwe is arguably higher than any other African country.

There is intense disequilibrium and inequality in revenue sharing given that more than 85% of the revenue the government collects ends up in the bank accounts of less than 12 % of the populace.

How does it feel to ordinary citizens that 90% of their ever increasing tollgate fees will end up in someone’s pockets either as unjustified bonus or undeserved salaries, that a higher percentage of the VAT you pay at every cash till point cannot be utilised for capital projects. This is a matter which has to be looked at with open eyes and without any iota of political bias as the struggling Zimbabwe economy can nolonger be pushed forward either with slogans or populist stance.

A closer look at the last monetary policy announced by the able leadership of John Mangudya was anchored on the need to revise the unsustainable price levels prevailing in the economy and the need to achieve wage freeze if possible.

Any government move opposing the need to exercise restraint in terms of both spending and wage levels will be at conflict with the announced policy statements.

An astute banker whose patriotic stance coupled with well grounded economics foundations, Mangudya has been spot on in his quest to see a turnaround being achieved for this economy.

When they appeared like the bond coins exercise was a futile attempt, I projected that with time it was going to be a coin of choice within the country and unsurprisingly it has spurned out to be so. This is mainly due to the sober and non populist character of the central bank governor who can equally deserve to be candidate for the treasury office any hour.

However, Chinamasa has remained an equally impressive bureaucrat since his appointment but the Presidium seems raffled by his rational decision to freeze bonuses. If allowed to make ratings, he seems to stand head and shoulders above every cabinet minister and his listening ear to both industry and commerce has been quite commendable.

Zimbabwe will continue being hounded by an unprecedented level of policy inconsistence which is unmatched by any other country with the 7 day reversal of bonus freeze after its announcement a clear case why Zimbabwe fares badly in the ease of doing business environment as espoused by the World Bank.

President Mugabe could also have used a wrong platform to reverse the bonus subject given that a greater percentage of the audience at the Independence celebrations were dominantly unemployed Zimbabweans or members of the defence forces.

I want to believe the matter was not debated in cabinet as well regardless of the fact that the presidium was not adequately informed of the development.

It is my firm belief that the scrapping of bonus will stand as a government policy or at worst the auditing of the civil service will be expedited well before the last quarter of 2015 in order to allow for a national budget which will not support numerous ghost workers or too many civil servants. The government cannot afford the luxury of shooting down both stances as it is common knowledge that Zimra is in a tops turves as characterised by their tax amnesty extending to year end.

The only relief in the whole chapter of bonuses is that they has never been a reserve to cater for these bonuses as a knee-jerk policy approach will be implemented as a fund raising exercise for the 13th cheque. This might imply no need to shout much after all there is no clear opportunity cost to how such a bonus fund could have been utilised assuming the freezing policy stands.

These articles are coordinated by Lovemore Kadenge, president of the Zimbabwe Economics Society. Email kadenge.zes@gmail.com and cell +263 772 382 852

Christopher Takunda Mugaga is an economist. He is the head of research for Econometer Global Capital, a regional finance and economics research firm.

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