Covid-19: Battered firms will struggle to pay PDL salaries

TAURAI MANGUDHLA

Zimbabwe’s firms, battling hyperinflation, production constraints and the effects of the coronavirus pandemic will struggle to pay salaries linked to the poverty datum line (PDL) as they fight for survival, analysts have said.

Despite the PDL officially breaching the ZWL$5000 mark in February at ZWL$5400 for a family of five, many ordinary employees’ salaries are a far cry at about ZWL$2500. This means most employees including civil servants who earn around ZWL$3500 live in poverty.

According to Zimstat, the PDL represents the cost of a given standard of living that must be attained if a person is deemed not to be poor with an individual whose total consumption expenditure does not exceed the food poverty line is deemed to be very poor.

Industry and experts contend it will never be business as usual post-Covid-19 in Zimbabwe and the rest of the world as some companies that have gone for close to a month without generating meaningful revenue, operating remotely or completely shut down, have to dig deep into their pockets to make the monthly pay cheque.

For businesses that had been teetering on the brink for years due to shortages of raw materials and incessant power supplies among other constraints that have made production expensive, Covid-19 will be the final blow and there is no coming back, at least immediately.

Company closures and massive job losses are expected in an economy like Zimbabwe that started witnessing such deindustrialisation in 2013 due to waning investor confidence and poor competitiveness. More job losses are looming, with at least 25 % of the formal workforce projected to cross the floor into the informal sector unless labour and business strike a win-win deal.

To contain the spread of the virus President Emmerson Mnangagwa declared a 21-day lockdown effective March 30. The lockdown ends on Sunday. Producers of all non-essentials have been the hardest hit and their fate becomes more apparent in a few days when normalcy returns, in the absence of an extension or mere part-relaxation of the restrictions.

Zimbabwe National Chamber of Commerce CEO Christopher Mugaga said the PDL should be around ZWL$9,500, a figure far beyond the reach of many employers.

“Business is definitely unable to chase the PDL, this will be worsened by other fixed costs such as rentals and also tax commitments which we don’t see the government waiving given the fiscal cliff edge it is thriving in,” said Mugaga, adding that very few are currently earning the ZWL$5400. “Given the threats to do with Covid-19, the challenging business environment, and inflation for example, very few businesses if any can pay at least such a number monthly and the strange thing is that the ZWL$ has markedly lost value, but it’s still difficult to generate which is confirmed by the fact that almost 50% of deposits are in the hands of only 200 companies countrywide,” Mugaga added.

With the after effects of Covid-19, Mugaga said it will even be more difficult to pay the PDL which means almost a quarter of the formally employed are expected to cross LIVINGSTONE MARUFU Zimbabwe is carrying out the second crop and livestock assessment despite the lockdown as the authorities move to get the picture of the total grain output which can be achieved in the 2019/20 agricultural season.

The country is under a 21- day lockdown to minimise the spread of coronavirus pandemic but the hunger threat has caused the Agriculture Ministry, Agriculture extension officers, and farmers organisations among other personnel to assess the possible output.

On the back of successive droughts in the past three years, Zimbabwe has more than eight million people under serious starvation and with erratic rainfall patterns this summer cropping season, the number could rise further. Zimbabwe Farmers Union executive director Paul Zakariya told Business Times that the second crop and livestock assessment will help the government to plan going forward.

“The second crop and livestock assessment has continued during the lockdown period as the government would want to know the possible crop output in the country and plan forward. Agriculture was placed under critical services hence the assessment continued,” Zakariya said.

“From the look of things, farmers from the northern side of the country will have better yields compared to their southern counterparts. Most farmers in Mashonaland provinces recovered well from that three-week dry spell and output is expected to improve.” Zimbabwe is expected to get just above 550 000 tonnes of maize output with the balance expected to be imported.

Zimbabwe requires 1.8m tonnes of grain for human and livestock consumption yearly and if the expected output is anything to go by the country is expected to import over one million tonnes of cereal. Zimbabwe which for over two decades has been denying genetically modified grain has now started to import it.

According to monetary authorities, the grain is draining the country US$1.4m daily and US$42m monthly to import maize from other parts of Africa and South America to ensure the country has enough food at any given time. The country imports 3500 tonnes daily at a price of between US$340 and US$375 per GMO tonne and US$360 to US$400 per tonne of nonGMO maize.

Maize is Zimbabwe’s staple grain that traditionally impacts the country’s economy given its skewed influence in determining inflation rates of the consumer price index that determines the average rise in the cost of living. Govt pursues crop assessment the floor to join the informal economy.

He said employers’ ability to pay a living wage remains limited in the absence of stimuli and bailouts from the government.

“As businesses, we are expected to honour tax obligations and other regulatory fees. Unlike other nations we won’t expect a stimulus or relief package from the government which, therefore, means wage bill is the only cost we can manage at this hour hence the PDL will remain an academic benchmark regardless of it being low if real economic realities are factored in,” Mugaga. Employers’ Confederation of Zimbabwe (EMCOZ) president Israel Murefu said not all sectors have ever been able to pay PDL-linked salaries. He said most families are living in poverty given that the current minimum wage is 50% of the PDL and assumes a family has two gainfully employed members. The 50% of the PDL, Murefu said, remains very high for some sectors and they will struggle or even fail to pay it because capacity utilisation is currently very low in almost all industrial and commercial sectors largely due to inadequate power, water, fuel, foreign currency, capital and lack of access to credit among other constraints.

“If companies are operating well below capacity, they will also lack the capacity to pay the full PDL as a minimum wage let alone the statutory minimum wage,” Murefu said, adding employers’ inability to pay will be exacerbated by the current Covid-19 crisis and lockdown.

“While employers would like to pay the PDL or the statutory minimum wage, they lack capacity. So in Zimbabwe, we have an unfortunate situation where both businesses and employees are struggling and they have to find and accommodate each other for survival and sustainability.”

Murefu said while the PDL is something to aspire to currently there are only two sectors, banking, and energy that are paying roughly that level. The rest are not yet able to sustain it and therefore paying below the PDL and more likely for the foreseeable future.

The EMCOZ leader said the situation for employers has been worsened by the Covid-19 and some employers may totally fail to recover if no rescue package is provided. “Some companies could even fail to sustain those low salaries and for now, I think the focus should be on business survival and saving employment and if businesses could pay something and save jobs during this crisis that would be commendable,” Murefu said.

He, however, said the outlook for both business and labour is bleak in the absence of deliberate government efforts to ensure companies remain operational and therefore able to employ. Zimbabwe Congress of Trade Unions president Peter Mutasa said the trade union does not believe that the PDL itself correctly captures the reality on the ground where most goods and services are pegged in USD.

For example in February, argued Mutasa, rentals were already around US$15-20 per room. For three rooms it means for accommodation only workers were paying US$45-60 equating to between ZWL$ 2,250 and ZWL$3000. Comparing this with the minimum wage that the Government recently gazetted, ZWL$2,500, it means that majority of workers are not able to pay rentals from their salaries. Mutasa said during the Tripartite Negotiating Forum deliberations of March on minimum wages, members went to the shops and took prices from three major supermarkets and applied them to the Consumer Council of Zimbabwe breadbasket.

The basket amounted to ZWL$ 10850 and this was before the recent steep increases of goods and services. Mutasa said the future of workers in Zimbabwe is bleak and reminiscent of the colonial mistreatment of the native working class. He said salaries continue to be eroded and pensions are wiped out for the second time in a decade. He said workers walk to work and are starving with their families. “If there is a group that feels let down in independent Zimbabwe, it is the working class. There is no way out for workers besides uniting and fighting against this exploitation and repression. Workers have to resist these policies that are impoverishing the majority and enriching a few connected cronies,” Mutasa said.

The ZCTU maintains that a sustainable living wage is US$600 which was the last USD PDL in 2018. This would amount to ZWL$15000 using the official rate. However during negotiations at the TNF, parties had agreed with the government to a figure around US$230, which amounts to about ZWL$ 5750.

The ZCTU’s view is that Zimbabwe must just revert back to the multi-currency regime to ensure that workers’ salaries will not be quickly eroded by inflation and exchange rate fluctuations.

“Those in government and business benefiting from the current regime at the expense of workers, poor farmers, and other citizens are not willing to lose these arbitrage benefits. “They are making lots of money through this. This is the reason why workers and the poor must resist,” Mutasa said

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