THE alarming rate at which the economy is deteriorating is now being demonstrated by how blue-chip companies are instituting cost-cutting measures such as freezing recruitment of staff, retrenchments and termination of contracts, leaving thousands more workers redundant.
Rio Tinto, a British-Australian multinational metals and mining corporation, last month disposed of its stake in Murowa Diamonds and Sengwa Colliery Limited as the global resources giant exits the local mining sector which it has been part of for many decades.
Blue-chip beverage manufacturer, Delta Corporation, the biggest counter on the Zimbabawe Stock Exchange (ZSE), has instituted cost-cutting measures while mobile phone operator, Econet, has cut salaries among other survival strategies.
A debilitating liquidity crunch, lack of cheap funding, low capacity utilisation and low disposable incomes are just some of the major factors militating against companies across all sectors of the economy, forcing management and shareholders to take drastic measures to remain viable.
This is despite Zanu PF’s 2013 electoral promise to create 2,2 million jobs during government’s five-year tenure.
The tremors of economic collapse that have persisted for almost two decades are being felt by market heavyweights.
Econet has cut salaries of its employees by 35% starting July 1 this year. The network provider has slashed employees’ working hours and has asked its suppliers to cut their prices by 15% if they want to continue doing business with the company.
“The company has had to cut capital expenditure, and stop further employment creation for the first time since it began operations,” the company said in a statement. “Econet is one of the largest employers in the country, both directly and indirectly, and is concerned about the job losses that now look to be inevitable.”
Delta has also introduced a raft of cost-cutting measures which include freezing staff recruitment and promotions as well as reducing canteen costs, after a slump in sales of their products blamed on the lack of disposable income.
“Business performance continues on a downward spiral. Naturally, we need to respond with speed to streamline our operations in line with the business performance,” human resources director Marshall Pemhiwa wrote in a memorandum to management that includes heads of departments.
“With immediate effect all external recruitment and internal promotions are frozen. Exceptions must be authorised by the relevant business director, human resources director and chief operating officer.”
Economist John Robertson called Rio Tinto’s exit a vote-of-no-confidence in the country.
Yet another strong indication that the sinking economy is gasping for breath is the reaction by companies to a Supreme Court ruling last week Friday that allows companies to terminate contracts on three months’ notice. Like ducks to water, many companies have welcomed the ruling, wasting no time in laying off hundreds of workers they now deemed a financial burden.
The ruling has triggered a bloodbath. More than 400 Sino-Zimbabwe workers on Wednesday were locked out of the company’s premises and served with termination letters. TN Holdings, which has been struggling to stay afloat, laid off most of its employees as did furniture shop Pelhams. Ferrochrome giant Zimasco was in the process of terminating the contracts of 648 workers.
The carnage also extends to Econet that terminated the contracts of some of its employees. Steward Bank, a subsidiary of Econet, also took advantage of the ruling to tear up contracts of some of its workers. The same scenario prevails at major car dealers such as Zimoco and Croco Motors.
The ruling has expectedly raised alarm with the Zimbabwe Congress of Trade Unions secretary-general Japhet Moyo saying it has turned the country’s workforce into “temporary workers”. Cabinet met yesterday to discuss the unfolding crisis, but Labour minister Prisca Mupfumira said afterwards consultations are still on.
Economist Godfrey Kanyenze said the cost-cutting measures by blue-chip giants in the local market shows that “the chickens are coming home to roost”.
“It is not entirely unexpected as the economy has experienced de-industrialisation and informalisation since the mid-1990s with no policies to stem the tide,” Kanyenze said.
He added that there is no way companies such as Econet and Delta could thrive “when everything around them is collapsing”.
Employers Confederation of Zimbabwe executive director John Mufukare said the latest wave of contract terminations showed the parlous state of most companies affected by a haemorrhaging economy.
“Why on earth would employers at a business which is performing well want to offload workers?” Mufukare queried in an interview this week. “How are we assisting businesses if we force them to keep excess workers when they are struggling until they are liquidated? Retrenchments are the last line of defence and for us to pretend that employers are just being cruel is totally dishonest.”
A total of 1 011 workers were left jobless in the first quarter of this year while more than 7 000 workers were retrenched last year.
Last week Vice-President Emmerson Mnangagwa conceded that Zimbabwe has fallen far behind other countries in terms of development, saying government needs to swallow its pride and review controversial economic policies to attract critically-needed foreign direct investment.