THE planned retrenchment of between 400 and 450 workers by major sugarcane producer Tongaat Hulett is the latest indicator of the worsening economic decline as the impact of the volatile currency crisis takes its toll.
The economy is facing major headwinds characterised by a debilitating liquidity crunch, foreign currency and fuel shortages, prolonged power outages which last up to 18 hours and runaway inflation that has surpassed the 500% mark, decimating incomes.
Tongaat offered its workers “voluntary retrenchment packages” as it redefines what it said was “its future on the back of tough trading positions”. Tongaat executives though have preferred to call the voluntary retrenchment exercise “voluntary separation”. Tongaat CE Adrian Mhere told workers on Monday that this week was the deadline for those who wanted to take up the retrenchment offer.
Zimbabwe Congress of Trade Unions president Peter Mutasa told businessdigest that the retrenchment of 450 workers is symptomatic of the rapid deterioration of the economy.
“It is not only the 450 at Tongaat who are losing jobs. People are losing jobs in every sector of the economy. This shows the economic crisis and economic uncertainty the country is facing that government is failing to deal with,” Mutasa said.
He prescribed that government needs to urgently address the currency volatility crisis, fueled by the banning of the multi-currency regime through Statutory Instrument 142 last year.
“We have failed completely to de-dollarise and as labour we recommend that we adopt the (South African) rand.” The looming retrenchment of Tongaat Hulett workers comes at a time more than 20 companies failed to reopen after the Christmas holidays, according to statistics provided by the Zimbabwe Federation of Trade Unions (ZFTU), leaving about 500 workers in the lurch.
Hopes of reversing the unemployment rate and stimulating economic growth have been dashed by dwindling investment into the country, with foreign direct investment plummeting from US$771 million to just US$259 million last year. The gloomy outlook is aggravated by figures reeled out by the Confederation of Zimbabwe Industries (CZI) in its 2019 Manufacturing Sector Survey recently. It revealed that capacity utilisation fell from 48,2% to 36,9% last year, warning it will further plummet to 27% this year if government fails to drastically change the direction of its policies. It also revealed that no sector of the economy had achieved output higher than 50%.
“At 27% capacity utilisation levels, some companies would have closed with follow on effects,” CZI chief economist Tafadzwa Bandama warned during her presentation at the launch of the survey for the period between September 2018 and August 2019.
She added that the slowdown will result in higher unemployment, rising poverty levels, shortage of goods and services, low export volumes and increased shortage of foreign currency.
“As labour, do you hope that your employer will still employ you in 2020 if capacity utilisation will be at 27%?” Bandama queried at the survey launch. “All the other factors like inflation, power shortages, raw material shortages, those are all just branches and leaves, but the root cause is foreign currency.”
The depreciation of the local unit has had a devastating impact on the economy. Company balance sheets, value, stocks, pensions and savings have also been badly eroded.
The poor have been the hardest hit by price spikes, rising inflation and eroding incomes. The situation has been exacerbated by exchange rate movements amid signs of worsening poverty levels.
The depreciation of the local quasi-currency is making imports even more expensive, undermining prospects of achieving a period of sustained economic growth and rendering the Vision 2030 target of attaining upper middle-income status a pipedream.
ZFTU secretary-general Kenias Shamuyarira said the retrenchments make it impossible for government to meet its ambitious target of attaining upper middle income status by 2030.
“This is as a result of policy inconsistency,” Shamuyarira said. “When you make 450 people redundant in one swoop, by the time we get to 2030, there will be no economy to talk about.”