THE proposed amendments to the Labour Act that has been tabled in parliament which mainly aims to save vulnerable workers from being dismissed on three months’ notice while simplifying the rigid, expensive and cumbersome retrenchment process, is an indication of the worsening economic crisis bedeviling Zimbabwe.
While the easing of retrenchment procedures and the laying off of thousands of workers following a July 17 Supreme Court ruling allowing employers to terminate contracts on three months’ notice without retrenchment packages will give temporary relief to many companies, albeit viability problems and job losses will worsen unless government addresses underlying economic problems affecting the country.
Wholesale measures which, among others, include attracting foreign direct investment (FDI), policy clarity and consistency, increasing exports and retooling are critical to breathe life into the ailing economy.
Thus addressing the country’s macro-economic environment should be government’s top priority.
The Labour Act Amendment Bill was crafted to ostensibly protect both workers and employers by cushioning workers from summary dismissals without compensation while making it easier, procedurally and financially, for employers to retrench.
Most Zimbabwean companies continue to battle a plethora of challenges among them a stubborn liquidity crunch, low capacity utilisation of less than 40%, obsolete equipment, high utility costs and lack of cheap funding, and had thus hastily taken advantage of the Supreme Court ruling to cut costs by laying off workers in order to stay afloat.
Prior to the court ruling quickening company closures and retrenchments were the clearest symptoms of the economic malaise, but some companies were being forced to keep workers only because they could not afford retrenchment packages.
Taking advantage of the court ruling, companies and state entities laid off about 20 000 workers in less than three weeks (more than 7 000 workers were retrenched last year).
Quasi-government institutions such as the National Railways of Zimbabwe, Air Zimbabwe and Grain Marketing Board, Zimpapers and the Zimbabwe Broadcasting Corporation led the carnage of lay-offs despite government expressing its abhorrence at the jobs cuts and its electoral promise to create 2,2 million jobs by 2018.
The proposed amendments also provide for a minimum retrenchment package for employees, if there is deadlock on negotiations for such a package between the employer and employee.
But the job losses, as well as government’s moves to make retrenchment easier, are clear signals of an economy in decline, according to labour expert George Makings.
“You do not retrench in a growing economy. You retrench in a dying economy,” Makings told employers at an Employers’ Confederation of Zimbabwe retrenchment meeting held recently.
Despite Vice-President Emmerson Mnangagwa declaring in an interview during a recent trip to China that government will “bite the bullet” and implement reforms that would bring the country “to the table of nations”, government only last week listed 23 farms, including land owned by beverage manufacturer African Distillers (Afdis), for compulsory acquisition under its controversial land reform programme.
The move has sent shudders down the spine of prospective investors, who have often insisted investment security was key to wooing investors.
But investors have unambiguously expressed their unhappiness over the current business environment in the country. The indigenisation policy remains largely unchanged despite assurance by Economic Planning minister Simon Khaya Moyo at a National Defence Course early last month that government is working on amending the law blamed for spooking investors. The law requires foreign firms to cede at least a 51% shareholding to indigenous Zimbabweans.
The business community has offered to help amend the damaging policy as it desperately seeks to revive its operations.
Confederation of Zimbabwe Industries (CZI) president Busisa Moyo told delegates at the body’s annual congress last month that business was prepared to provide government with indigenisation models favourable to the private sector.
“As business we understand that the indigenisation policy is here to stay, but it is the form and format of that piece of legislation that we must work on,” Moyo said in his opening remarks at the CZI annual congress in Gweru.
“We are looking at that piece of legislation to give you indigenisation models.”
The recently released United Nations Conference on Trade and Development World Investment Report 2015 shows Zimbabwe remains hostile to FDI as it persists with damaging policies and unworkable programmes which are fuelling an unfriendly business climate.
Compared to its neighbours, Zimbabwe got a paltry US$545 million in FDI last year while Mozambique received US$4,9 billion, nearly nine times more, pacesetter South Africa US$5,7 billion and Zambia US$2,4 billion. Business delegations from various countries such as the United States, United Kingdom, France and other EU states, China and Russia that have come to Zimbabwe of late have all complained about the country’s toxic policies and obstacles to doing business.
Zimbabwe ranks 171 out of 189 countries on the latest Ease of Doing Business Index, an indicator as to why the country is not attracting meaningful investment.
Government’s move to amend the Labour Act is a major deterrent to much-needed investment that will create jobs and resuscitate the economy, according to economist John Robertson.
“Government needs policies that support investment,” Robertson said. “If they can just force people off farms or simply take other people’s businesses, then there will be very little investment. Those who come to invest will charge very highly to cover the risk involved.”
While the proposed Labour Act amendments will restore social justice for those dismissed on three months’ notice, there is need to focus on the restoration of productivity, argues economist Godfrey Kanyenze.
“If retrenchments are the only business in town, then you have got a major problem,” said Kanyenze.
“The real business should be resuscitating productivity, sustainability and competitiveness,” he said proposing a pro-poor framework of “decent work-based economic growth”.
Thus as long as government fails to address the root causes of the current economic turmoil, the labour amendments will just remain a bandage on a festering wound which needs surgical operation.