Retrenchment guidelines not panacea to job losses

INTRODUCING retrenchment guidelines to discourage struggling employers from laying off workers due to serious economic problems will not address the root cause of the redundancies such as the debilitating liquidity crunch, low capacity utilisation, high cost of utilities and incessant power cuts.

Kudzai Kuwaza

In any case, last year government resolved to review the “rigid” labour laws to make them more suited to the current operating environment by making it easier for companies to hire and fire workers. This would, purportedly, increase productivity at workplaces and improve competitiveness, among other motives.

Labour minister Prisca Mupfumira recently introduced stringent requirements for companies looking to retrench employees in order to discourage companies from laying off workers.

Among the requirements is that companies reveal their salary structures, particularly for executives and board members, and the difference in the wage bill after the retrenchment exercise is implemented.

“What we are saying is let us look at other ways to cut costs other than just retrenching workers and if we can save 20 families by saving 20 jobs, let us look at those options,” Mupfumira said in an interview recently.

The quickening retrenchments have become a constant source of embarrassment for the ruling Zanu PF government which, in the run-up to the 2013 general elections, promised it would create 2,2 million jobs by 2018. The opposite has been true: more and more companies are downsizing or closing shop.

A flurry of applications by various companies to lay off workers has threatened to overwhelm the Retrenchment Board as the country’s economy — weighed down by an employment rate of above 85% — becomes more informalised.

However, there is a host of obstacles that need to be addressed if Mupfumira’s requirements are to have the desired effect of reducing retrenchments. Among others is companies’ failure to access cheap credit, which has inhibited efforts to expand their operations or retool so as to replace obsolete equipment that has been drastically reducing viability.

The country’s current capacity utilisation of 39%, an increase of just over 2% from last year, provides ample evidence of the disastrous effects of the liquidity squeeze. This is a considerable fall from 2011 levels when capacity utilisation was just more than 57%, and has contributed to companies’ decision to downsize staff.

Inadequate but costly power supplies have also been a major contributing factor to companies’ decision to downsize operations.

Many businesses have had to turn to high-voltage diesel generators to sustain production during lengthy periods of power outages, a move that has increased the cost of production and therefore competitiveness of products in a market teeming with cheaper foreign products.

The regulations have not gone down well with industrialists who bear the brunt of the obstacles hindering business. Some companies have already started circumventing official the retrenchment route to escape the guidelines by terminating employment contracts on notice, a move being fiercely resisted by labour.

The Supreme Court recently heard an appeal by two former managers at Zuva Petroleum (Pvt) Ltd who took their former paymaster to court challenging termination of their employment contracts on notice.

Should the court rule in favour of Zuva, this could have a domino effect on the way employers lay off their workers. This has caused anxiety among the various labour unions at a time many workers are still to receive their retrenchment packages long after redundancy.

“Stringent retrenchment regulations are not a holistic approach to the problem of retrenchments,” says economist Godfrey Kanyenze.
“There is a need to deal with the causes behind the retrenchments such as infrastructure deficits and the ease of doing business. It is like an elephant: you cannot fell it by just pulling its ear.”
It is imperative to have a social contract by the three parties — government, business and labour — to resolve the retrenchment conundrum among a host of other challenges bedevilling the economy, Kanyenze said.

Soon after the announcement of the regulations, an industrialist who preferred anonymity said: “Members of the business community have met informally and the feeling is that the move by government is populist.

“We feel that this is an example of inconsistency we always complain about. On one hand, they introduce labour law reforms that make it easier for employers to retrench, and on the other, they want to make it impossible (to retrench) with all these requirements.

“Employers felt that the move by government drags them back to an issue they thought had been resolved and this will not bring about any progress at all.”

There has been an alarming increase in retrenchments since Zanu PF won the 2013 harmonised elections, with more than 7 000 workers retrenched last year alone. In the first quarter of this year, 1 011 workers from 67 companies have been laid off.

Sectors that have retrenched are transport, bakery, commercial, construction, education, engineering, insurance, mining and motor sectors, with the food sector accounting for the highest number of retrenchments.

Former Zimbabwe National Chamber of Commerce president Oswell Binha emphasised the need to deal with the causes of retrenchments, and not merely the symptoms.

“This is not an issue of (retrenchment) guidelines,” Binha said. “The government should be dealing with the causes rather than the symptoms. We will continue to have more casualties, guidelines or no guidelines.

“Each and every stakeholder must sufficiently play their role to address our challenges. We must get our priorities right rather than create mountains out of molehills.”

But the political implications of the continued economic crisis suggest government, running out of time to turn around the economy, will continue implementing the piecemeal measures even if they only address symptoms, not root causes.