GOVERNMENT last week awarded civil servants a Covid-19 allowance of US$75 and gave pensioners an allowance of US$30 as part of a package to cushion them against runaway inflation that has galloped to nearly 800%. The government offer has, however, been rejected by a restive workforce as evidenced by the strike by health workers which began last week. Acting business editor Kudzai Kuwaza (KK) this week caught up with Zimbabwe Congress of Trade Unions president Peter Mutasa (PM, pictured) to discuss various issues which include the prospect of the economy dollarising completely, job losses and the effectiveness of mass protests. Below are excerpts of the interview:
KK: Government recently announced a United States dollar-denominated Covid-19 allowance for civil servants. Will this lead to payment of salaries in United States dollars for workers?
PM: What we are witnessing is monumental state failure. There is nothing that the government is doing that shows the government is alive to the serious economic and humanitarian crisis we face.
We have been calling for government to come to the table and collectively address the problems we face holistically. We are clear that these knee-jerk reactions and half-baked policies will further sink us into deeper problems.
The main problem with our government is lack of consultation leading to arbitrary policy formulation. This leads it into coming up with bad policies that lack ownership and support of the citizens. On this particular one, there is no doubt that not much thought has been put into the policy formulation.
Any policy pronouncement that requires many press conferences to further explain is normally not a good policy. Firstly, the government says this is a Covid-19 allowance for three months. This indicates that it is a temporary allowance. Then it says no one will be able to withdraw it, indicating that it is not a salary, but some form of coupon. This means one cannot depend on this for borrowing or long-term planning.
Again, the government that has been barring private sector employers from paying salaries in foreign currency, only makes an announcement for public sector workers. It did not come up with any legislative guidelines for the private sector on foreign currency salaries.
As a result, we warn workers not to believe that this will automatically lead to payment of salaries in United States dollars. Workers have to remain focused on our demand for US dollar salaries because currently workers are earning in Zimbabwean dollars. Majority of workers earned RTGS this month.
KK: When government announced the package, the ZCTU tweeted that it was too little too late. Can you elaborate on that?
PM: We warned government against experimenting with the Zimbabwean dollar way back in February 2019. Prior to that we had vigorously opposed the introduction of bond coins in 2016.
We clearly explained how that would erode market confidence and how the local currency would lose value. We also explained how the majority of poor citizens were going to lose their pensions and savings as well as erosion of salaries.
ZCTU warned government that this policy will lead to hyperinflation and currency instability. We had observed that the necessary economic fundamentals that would guarantee stability of the local currency were not yet in place. These included sufficient import cover, resolution of the debt overhung crisis and independence of the Reserve Bank amongst other conditions.
The government ignored this advice and plea. As result inflation has officially gone over 765%, the exchange rate is now beyond US$1:ZW$57 officially. This has also pushed the poverty datum line to above ZW$8 000 hence most workers are now entrapped in serious poverty. All these official figures are managed and in the actual market reality, it is double this.
This is why many economic agents are rejecting the bond notes and the market has self-dollarised.
It is therefore, insane and indeed too late to try to half-heartedly introduce this US$75 Covid-19 allowance. The market now needs complete redollarisation because bond notes have already been rejected.
KK: The local currency is rapidly depreciating. Does this, in your view, make dollarisation inevitable?
PM: Re-dollarisation is not only inevitable but has already become a reality. All economic agents have adopted dollarisation. The market is more powerful than government decrees. Fiat money is nothing more than the trust and confidence people have towards the policy makers and the institutions guaranteeing it. The market has passed a vote of no confidence against the bond notes and RTGS. This is essentially a vote of no confidence against the government and central bank.
Just like in 2009, the government had to officially adopt dollarisation after the market had already dollarised. What is happening has a powerful force of economic laws dictating it and whether government makes a pronouncement or not the market has dollarised.
KK: What in your view should be the national minimum wage?
PM: Fixing the minimum wage in a hyper inflationary environment like ours is very difficult. Again, it cannot be done using the local currency because the exchange rates are rapidly changing daily.
This is why in February 2020 we demanded that we should go back to the US dollar poverty datum line that was obtaining in August 2018. This is a period we believe we were still dollarised and prices had not moved much as a result of bond notes. ln other words although we had the bond coins, the exchange rate was still 1:1 to the US dollar. At this point the poverty datum line was US$598.
Of course employers disputed this and argued that in reality the market had set an exchange rate between the two currencies and not the official 1:1 illusion.
This led us to agree that we find a mechanism of factoring this reality. Our preference based on economic advice from our experts was to initially use half of what was the poverty datum line then. This means our preferred minimum wage would be close to US$300.
However, after further negotiations, the government broke the ice and proposed a formula that was generally agreed to. The formula entails deducting 25% from the US$598 August PDL. Then use half of the resultant US$449 as the minimum wage.
This would have resulted in a minimum wage of US$225. This we agreed to and believe is a logical and fair minimum wage to start on. We also further agreed to isolate domestic and agricultural sectors, which would have negotiated lower minimum wages.
KK: You have been calling for widespread demonstrations by workers, but these have resulted in arrests or with police not giving the go ahead for the protests. How effective, given these circumstances, are demonstrations as a form of protest?
PM: History shows that workers have never been granted any rights on a silver platter. All the rights we enjoy today came from blood and tears of our forebears. They suffered at the hands of authorities for us to enjoy these rights.
Even our freedom from colonial bondage, which was initiated by the working class did not come easy.
There is no exception and the ruling elites and their cronies in business will not lightly grant us a living wage. We have to wage our struggle. It will not be won in one day, it has to be persistent.
However in the past, we realise that the government sponsored agent provocateurs to cause violence in order to have excuses for unleashing state violence against defenceless workers. So, this time we have to ensure that the protests are massive but very peaceful. We will ensure that workers and citizens flush out any such agents whenever they are identified and acting against our interests. In addition, we use to have few days of protests. This time, however, it will be consistent until we get a living wage.
Our word to the working poor is that we are our own liberators and we must fight for our freedom and prosperity. We are in a predator state, the ruling elite and its cronies are looting and not concerned about the majority. The level of reported grand corruption indicates that we are on our own.
We have to choose between dying silently of hunger in our homes or fighting for our survival by rejecting oppression and repression. In our view, we have no choice, we have to peacefully fight back in terms of the Constitution and Labour Act.
KK: With the advent of Covid-19, what has been the impact in as far as job losses are concerned?
PM: The government messed up, by not listening to stakeholders. Although we are yet to determine the true figures, there is no doubt we are going to lose a lot of jobs.
We faced our own peculiar challenges before Covid-19. Over half of the population, 7,7million faced starvation, over 70% were in poverty and 34% in extreme poverty, we also had inflation and currency depreciation.
We ought to have acted diligently and differently from other countries. Instead the government went on to destroy the market stalls of the informal sector thereby destroying many jobs.
By neglecting to address the currency crisis, the government is further destroying many sectors. The real estate sector has been destroyed as no one can sell a property using the useless bond notes. There is no longer any hire purchase or lease finance contracts. Banks and microfinance cannot advance loans. All this is destroying jobs.
KK: The Reserve Bank of Zimbabwe this week introduced a forex auctioning system and ditch the fixed exchange rate to improve the availability of forex for business. What is your view to this?
PM: For as long as they do not address the economic fundamentals and institute economic and political reforms, this will not help. The attempt to chase black market rates is not achievable. We experienced this auction system in the past and it dismally failed.
In fact, we have already seen official exchange rates moving upwards by over 100% thereby moving prices of fuel by over 200%. Did salaries move? No, but prices of all goods and services have moved. This is not sustainable and this will just crash land us in the 2008 hyperinflationary economic crisis.