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Retrenchments not the solution

CHICKENS are now coming home to roost.

Zimbabwe Independent Editorial

The ruling Zanu PF government has for years been making suicidal economic policies and populist decisions for electoral purposes, but now its reckless actions are catching up with it.

Hard choices which have serious political implications have to be made. Their real impact will however be felt during the 2018 elections, although in the meantime there will be a serious job losses bloodbath and recriminations.

Beset by a shrinking revenue base as the economy continues to nosedive, authorities have now been forced into civil service reforms, particularly rationalisation of the bloated professional bureaucracy through retrenchments and wage bill reduction.

While retrenchments and cost-cutting measures are a good intervention in saving struggling companies from going under in such environments and rescuing government from failing to fulfil its obligations, including paying civil servants who deliver social services, they are in themselves a manifestation of deep-seated problems, not a solution. They are merely a survival strategy. The solution really lies in fixing the macro-economic fundamentals first, while dealing with the micro situation.

It mustn’t be forgotten we are here because of President Robert Mugabe and his cronies’ policies and decisions which led to the current economic meltdown. A wave of company closures and massive job losses is sweeping through the broken economic landscape and emergency interventions are now inevitably being made.

With government revenues dwindling as the tax base shrinks, authorities are now moving to retrench some of its civil servants to reduce the US$120 million monthly wage bill. Government is anxious the unsustainable wage bill, currently gobbling about 83,4% of revenues at the expense of capital expenditures and social service delivery, must be contained to avoid a catastrophe.

Overall expenditures on employment costs during the first half of 2015 were US$1,54 billion out of a total US$2,07bn revenues. Recurrent expenditure chewed up a staggering 92,5% of government revenue in 2014, with wages accounting for 81,5%, leaving just 7% for crucial capital projects.

Presenting his mid-term fiscal policy review statement in parliament in Harare yesterday, Finance minister Patrick Chinamasa said government has no choice but to retrench even if it ironically promised to create 2,2 million jobs by 2018.

But then downscaling must be designed to reduce the size of the workforce to improve the efficiency and quality of the public sector, not just to save money. It should also be part of an effort to increase economic growth and cut fiscal deficits.

Government has been in a dilemma as the retrenchment process is in sharp contrast with its electoral promises. The process, which is an admission of failure, will damage Zanu PF politically and could have very serious consequences in 2018.

Economically, severances will not resolve the problem. Government needs far-reaching reforms and policies which create an enabling business environment to attract investment to ensure recovery and growth. Desperate fire-fighting measures won’t work in the long run.

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