Massive job losses in 2016

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Many companies in Zimbabwe closed shop last year due to harsh economic challenges.

THE year 2016 was another annus horribilis for workers with the closure of more than 260 companies from various sectors this year as the economic crisis continues taking a toll.

By Kudzai Kuwaza

Company closures are symptomatic of an economy in turmoil, characterised by a debilitating liquidity crunch as evidenced by an acute cash shortage that continues unabated despite the introduction of bond notes, capacity utilisation of less than 50% and obsolete equipment.

According to statistics from the Zimbabwe Congress of Trade Unions, 229 companies closed shop in the first half of the year.

At least 81 companies closed in the first quarter of the year. The closures, in the first quarter, were from the hotel and catering sector, which was the hardest hit with 69 companies shutting down, mining sector (seven) and engineering (five), bringing the total to 81. In the second quarter of the year, 148 companies folded from three sectors, namely construction, clothing and motoring.

“We have established that 91 companies in the clothing sector closed in the second quarter of this year,” ZCTU secretary-general Japhet Moyo said in an interview in June this year as he gave a breakdown of companies closed in the second quarter. “In Bulawayo, 25 clothing companies closed shop, while we had 66 clothing companies shutting down in Harare.”

The construction sector was heavily affected in the quarter with 56 companies closing shop. Moyo also revealed that during the second quarter, 25 construction companies closed in Harare, seven closed in Bulawayo, three in the Gweru region, 17 shutting down in Mutare and another five closing shop in Masvingo.

“This is definitely shocking and disturbing because the list of these closed companies used to contribute money to the union,” Moyo said of the closures in the first half of the year. “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.”

However, the bloodletting would continue in the second half of the year as another 33 companies shut shop with 26 of them folding last month. Among the 26 companies that shut down, eight were restaurants, with 38 workers losing their jobs. Five companies closed in the construction industry which resulted in the loss of 30 jobs as well as the closure of three companies in the commerce and retail sector, leaving 15 jobless.

Other closures, according to ZCTU statistics, were in the small-scale mining sector where six mines ceased operations with 60 workers being thrown into the streets. Four companies from the locomotive and automotive sectors also closed down. The closure of companies last month has resulted in the loss of at least 143 jobs at a time the unemployment rate in the formal sector stands at 95%.

The food sector continues to hemorrhage with the closure of eight restaurants last month, bringing the number of companies in that sector that have shut shop this year to 79. Ziscosteel sent its 3 000-strong workforce into the streets empty handed when it shut down this year. It adds to the 4 610 companies that shut down between 2011 and 2014, resulting in the loss of 55 443 jobs. These grim statistics make a mockery of the Zimbabwe National Statistical Agency’s recent figures which revealed that only 11% of the country’s population is unemployed.

The devastating impact of the company closures is reflected in the 2017 national budget presented by Finance minister Patrick Chinamasa a fortnight ago. According to Chinamasa’s budget statement, revenue of US$2,876 billion was collected between January and October 2016, which fell short of the target of US$3,158 billion. It was a negative variance of 9,8%.

The National Social Security Authority (Nssa) had lost close to 18 000 contributors due to retrenchments and company closures as at September 31 2016 on the back of a floundering economy.

“Between January and September 2016, a total of 17 752 employee accounts ceased being funded,” Nssa board chair Robin Vela told the Zimbabwe Independent last month.

As the country enters election mode, the crisis is likely to worsen, according to economist Prosper Chitambara.

“I do not think the situation will improve as we enter 2017 with the country preparing for the 2018 elections,” he said. “If the government embarks on populist fiscal policies that will widen the deficit. The government is borrowing on the domestic market, crowding out the private sector, making it difficult for them to operate so the situation is likely to worsen.”

Chitambara added that the business environment and investment climate remain problematic, which will remain as obstacles to turning around the economy and stemming the tide of job losses.

Economist and Buy Zimbabwe chairman Oswell Binha said the number of job losses in 2016 is disastrous.

“The mortality rate is too high. It is a catastrophe,” Binha said.

He pointed out that to stop the hemorrhaging of jobs, it is vital to look into productivity and value chains that have linkages to industry. Binha said the value chains need “money, confidence and certainty”.

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