Wage bill scuttles austerity plans

Screen-Shot-2019-01-31-at-11.00.00-PM.png

Kudzai Kuwaza

THE decision to placate civil servants through a salary increment and a cushioning allowance is a major dent in Finance minister Mthuli Ncube’s efforts to cut the government wage bill, as part of measures to revive the ailing economy through instituting strict financial reforms.

Government has held marathon meetings with civil servants under the National Joint Negotiation Committee as it battles to avert a crippling strike. The umbrella civil servants representative body, the Apex Council, had given government a 14-day notice of intention to strike over low salaries and poor working conditions. Government workers are demanding $1 733 for the least paid worker, which government says it has no capacity to pay.

The demand for a salary increment has been prompted by government’s decision in October last year to separate RTGS and forex accounts, which resulted in the skyrocketing of prices and shortage of basic commodities. This was worsened when government announced a 150% increase in fuel prices on January 12, which triggered a wave of price increases for basic commodities, further eroding disposable incomes.

This resulted in deadly civil unrest in major cities characterised by looting and destruction of property. A dozen people died, while scores were injured during the protests as the army and police brutalised and shot citizens. About a thousand people have been arrested since the protests a fortnight ago.

Government has offered $300 million towards the improvement in salaries. This has been met with derision from civil servants and rejected as it amounts to a 18,5% increment or an additional $78 for each worker. This is over and above the cushioning allowance government has awarded its workforce on a sliding scale of between 5% and 22,7%. The two parties were locked in further negotiations this week over the salaries so as to prevent job action by civil servants.

This came on the back of a 40-day strike by junior doctors who were demanding better working conditions. Among the demands was the payment of salaries in foreign currency — a request which was rejected by the broke government.

The increase in the salaries of civil servants is in stark contrast to Ncube’s 2019 National Budget presented in November last year based on austerity.

Ncube’s maiden budget statement, presented under the theme ‘‘Austerity for Prosperity”, introduced a number of cost-saving measures such as the cutting of salaries of senior government officials by 5%, the retirement of more than 2 000 youth officers and the reduction of foreign embassies.

The wage bill, which gobbles up 90% of government revenues, leaves very little space for investment in major infrastructure development projects.
Chairperson of the parliamentary portfolio committee on Primary and Secondary Education Priscilla Misihairabwi Mushonga revealed recently that 92% of the money allocated to the sector from the fiscus goes to salaries, indicating the arduous task Ncube faces in rationing the wage bill.

This problem is not confined to Ncube alone as Patrick Chinamasa found out during his tenure as Finance minister.

Despite Chinamasa pronouncing in the 2018 budget measures to cut the wage bill, the first budget since Emmerson Mnangagwa took over as President through a coup which toppled Robert Mugabe, the new President placed further burden on the fiscus when he increased salaries of soldiers and the rest of the civil service by 22% and 17% respectively just before the disputed elections held on July 30 last year.

This, Chinamasa pointed out would increase the wage bill to 120% from its current levels and widen the country’s fiscal deficit.

The hike in civil servants’ salaries will defeat the purpose of Ncube’s plans to cut down on spending, says business consultant Simon Kayereka.

“The increase of civil servants’ salaries will exacerbate the wage bill and it will end up swallowing more than 90% of revenue,” Kayereka asserted. “It will also have a domino effect in that it will increase prices of goods and increase inflation. In my view, government is stuck between a rock and a hard place.”

He said unless government puts in place effective currency reforms, the problem will only worsen. The current scenario is a case of deja vu for Zimbabweans. During the Mugabe administration, efforts to contain the burgeoning wage bill were in vain. Nothing encapsulates this more than when Chinamasa announced in 2015 that he would suspend the payment of bonuses to civil servants in 2015 and 2016 to control runaway costs. However, a few days later Mugabe dismissed Chinamasa’s announcement, claiming that the presidium had not been consulted on the issue.

Economist Godfrey Kanyenze said the government’s current dilemma is as a result of the authorities’ failure to consult stakeholders.

“The problem is this top-down approach, which does not take into account stakeholders’ demands,” Kanyenze said. “Government came up with a 150% fuel hike which triggered price increases and inflation. Austerity is painful but it must be proportionate,” Kanyenze said.

He said the lack of inclusiveness by government is “ a betrayal of the development discourse”

“You cannot sustain that which is not inclusive,” Kanyenze pointed out. “We need an inclusive approach, we need social cohesion and that can only be done through a social contract.”

Top