THE recent retrenchment of 300 workers by Bindura Nickel Corporation and the planned layoff of more than 2 000 workers by Hwange Colliery Company and the National Railways of Zimbabwe are symptomatic of a shrinking job market caused by severe economic decline.
By Kudzai Kuwaza
There is little prospect of the situation improving in the short to medium-term.
The haemorrhaging of jobs through retrenchments and company closures is a result of the deepening economic crisis characterised by a debilitating liquidity crunch as evidenced by the biting cash shortage, low capacity utilisation of less than 35% and declining foreign direct investment.
This is due to the government’s failure to introduce policies to stimulate growth and abandon such toxic policies as the indigenisation law which President Robert Mugabe “clarified” for the umpteenth time earlier this year.
This comes at a time hundreds of jobs have been lost this year with the closure of at least 236 companies from various sectors of the economy including food, clothing and construction by August this year. Ziscosteel added to the carnage when it recently dismissed its entire 3 000-strong staff.
It adds to the decimation of the formal job market by the Supreme Court ruling of July 17 last year which allowed employers to dismiss workers on three months’ notice without paying a retrenchment package. Trade unions estimate that nearly 30 000 workers lost their jobs as a result while employers, after undertaking a survey, insist that only 9 115 workers lost their jobs as a result.
The large number of vendors in urban areas, particularly in the evenings, selling various wares ranging from fresh farm produce to clothing, is a symptom of high unemployment. The International Labour Organisation estimates that only 5% of the population is employed formally.
A key indicator of the decimated job market is reflected by a study conducted by the Vendors’ Initiative for Social and Economic Transformation (Viset) between February and April this year, which shows that more than 2 000 university graduates in Harare and Bulawayo have resorted to street vending as a means of survival.
It remains a damning indictment of the failure by Mugabe and Zanu PF to create 2,2 million jobs as promised in the ruling party’s 2013 election manifesto. The effect of rising unemployment on government revenue has been devastating. Tax collections, including Pay-as-You-Earn revenue, continue to plunge, according to a first-quarter report of 2016 by the Zimbabwe Revenue Authority (Zimra) chairperson Willia Bonyongwe.
Bonyongwe said companies owe Zimra US$692 million in income tax, up from US$578 million last year.
“This largely reflects the incapacity of most companies to pay, some of which may no longer be operational. In the short term, this tax head will remain under pressure and performance is not expected to improve all things remaining equal,” she said.
She said individual tax collected in the quarter amounted to US$167,43 million which fell short of the targeted US$196 million and a further reduction to the US$200,18 million collected during the same period last year.
She added that value-added tax on imports and customs duty both dropped by 1% to 12% and 9% respectively. Corporate income tax contributed US$52,55 million which was a miss on the targeted US$76 million.
That Finance minister Patrick Chinamasa had proposed in his mid-term fiscal policy statement last month to cut 25 000 jobs from the civil service, cut ministers’ salaries and suspend civil servants’ bonuses among other drastic measures, which were however rejected, shows how government is struggling to make ends meet as a result of the failure by the taxman to meet set revenue targets.
Trade unions such as the Zimbabwe Congress of Trade Unions (ZCTU) have also felt the pinch of the high unemployment rate as evidenced by the failure of 26 of the 34 affiliate groups to pay subscriptions.
ZCTU secretary-general Japhet Moyo expressed concern at the continued closure of companies.
“We are alarmed by the closure of companies, especially when you consider that there are no new companies being registered,” Moyo said. “This is definitely shocking and disturbing because the list of these closed companies used to contribute money to the union. If we were, for example, receiving US$40 000 from these companies, we are no longer getting it. It is not good news at all.”
The runaway unemployment rate is contributing to social frustration, as evidenced by several street protests over the government’s failure to create an environment conducive to job creation.
On Thursday last week, two graduands at the University of Zimbabwe graduation ceremony held up placards to Mugabe, who was officiating in his capacity as chancellor of state universities, expressing their disdain at the scarcity of jobs.
The Government does not have the will to implement bold reforms to attract investment and stem the tide of job losses, according to economist Prosper Chitambara.
He said unemployment is likely to worsen, at least until 2018.
“There is need for bold reforms to do with the non-performing parastatals. There is need for bold reforms to deal with corruption and there is need for bold reforms to deal with ghost workers,” Chitambara said. “With the looming elections in 2018, I do not think government will implement substantive reforms and investors have adopted a wait-and-see approach.”
Chitambara said foreign direct investment, which plummeted from US$545 million in 2014 to US$421 million last year, will only increase if there is an improvement in domestic-driven investment and if government addresses structural bottlenecks hampering the ease of doing business.
Economist John Robertson said unemployment will continue to increase as long as government fails to provide suitable conditions for investment.
“The problem of unemployment will not end unless billions of dollars are poured by investors to restore both the productive and service sectors,” Robertson observed. “Government will do well to start encouraging investors. They need conditions that suit their investment. But with policies such as indigenisation, that confidence is destroyed at the very beginning and they (investors) will come nowhere near the country.”