PRESIDENT Mnangagwa is determined to ensure that civil servants earn handsome salaries that are above the poverty datum line with the recent move by Government to increase their salaries and offer a cushion allowance as compassionate gesture to protect them from inflation and the effects of Covid-19, a top Government official said yesterday.
In an interview with The Herald, the Deputy Chief Secretary to the President and Cabinet (in charge of communications) Mr George Charamba said the 50 percent salary increase to civil servants that will be accompanied by a US$75 allowance, does not preclude the bargaining efforts that the Government workers are making.
Mr Charamba said the decision to roll out the US$75 cushioning allowances to civil servants and US$30 to pensioners, was taken after Government took into account the ravaging effects of inflation, the Covid-19 pandemic and the disparities between its workers and some employees and persons with access to free funds.
He said Government was touched by the plight of civil servants that after seeing their salaries being eroded, they have to confront run away prices in the country’s retail shops, hence the immediate intervention that, however, does not preclude negotiations with trade unions.
Mr Charamba said the pending Midterm Monetary Review and also Supplementary Budget will likely factor the concerns of Government workers.
“This Covid-19 salary review does not preclude or outlaw collective bargaining which is ongoing, if anything, it is an extra string on the bow of union leaders because the sum effect of this 50 percent salary review plus allowances is to move towards the poverty datum line. They must sing hallelujah and say we have had this gain from a compassionate employer which brings us nearer to the poverty datum line, that means we still have an opportunity of pushing for yet another significant review which will be accommodated in the Midterm Review and also Supplementary Budget,” said Mr Charamba.
As of March this year, Zimbabwe’s poverty datum line for a family of five stood at $6 420,87, and Mr Charamba said the Government is determined to make sure that its workers earn decent wages.
“Speaking from where I sit, there is huge sympathy for the bargaining efforts of the civil servants through their unions. Which means at the end of the day, come three months, we are likely to see a civil servant who is earning handsomely, the key thing being we don’t want to cause shocks that we are experiencing now where the money is eroded by inflation,” said Mr Charamba.
Amid protests from some union leaders that they were not consulted, Mr Charamba said the unionists should show leadership by accepting the compassion from Government and then bargain later.
“You can’t stand in the way of compassion in the name of unionism. Zimbabwe will be a first in the world to have civil servants who go on strike on account of the employer’s benevolence, the employer has decided to show compassion without the rigmarole of collective bargaining, you can’t get incensed with the employer improving your welfare, in any case they cannot protest on newspaper pages while they accept the same facility on their payslips. It will be a real lack of leadership on the part of the unionists,” said Mr Charamba.
Detailing the ordeal that civil servants now face, Mr Charamba said after Government reviewed salaries in February, through way of allowance, so much has happened that led to the compassionate decision to offer its workers a soft landing that was motivated purely by concern for workers.
“So many things have happened since February and the allowances that we were giving them were due to lapse this month. The emergence of Covid-19 only exacerbated what was already a bad situation for the civil servant. Inflation spiked to the current level which is over 700 percent, and when you have such a hefty upward trend in inflation, the inevitable result is that wages and salaries will get eroded because they will fail to catch up with the general pricing trend in the markets, wages end up being worse off. That inflation was traceable to a number of factors including market rates movements.
“There has been terrible movement in the money market particularly with the exchange rate because of depressed production levels in the country, which means depressed earnings from exports and also because of a number of illicit activities that continue to take place in the market. The brunt of all that was borne quite acutely by the civil servant because the civil servant has no option beyond earning in local currency and the salary reviews which are given by the employer. He has no other opportunity of getting money in any other currency. This is very much unlike in different categories of other employees in this economy who have other options to get foreign currency.”
He said that while civil servants are stuck with their salaries, others are dependent on various sources of income that include foreign remittances that amount to US$1,2 billion annually, free funds from various sources that amount to US$500 million, small-scale miners who sell their gold to Fidelity and earn around US$650 million and also smuggled gold that amounts to US$900 million annually.
“We have a civil servant who is earning in local currency and then we will have a double disparity — disparity on the basis of sheer income levels, then disparity on the basis of soft versus hard currency. If you add to that the issue of inflation, the exchange rate, then you have a cocktail of real diminution of the welfare of the civil servants,” said Mr Charamba.
Apart from that, he said although civil servants find themselves earning far less than most people, they still have to confront hefty prices in the same shops with those with the buying power.
“You can see the predicament of the civil servant. This is before we incorporate Covid-19, we are just talking about the hard realities in the labour market and also in the goods and services market. You see instant disparities that exercise the mind of Government.
“Then came the issue of Covid-19 which ensured that children are not going to school, workers are not going to work, the informal markets which could have provided some release for poorly remunerated civil servants were closed against growing consumption in the household of each civil servant.
“This is the cocktail of the disaster that was faced by the civil servants and I must say, realising the predicament of the civil servant, the President then instructed the Ministry of Finance and the Reserve Bank to work out a package in the interim pending the Midterm Review and the Supplementary Budget. We just realised that the situation was so dire that we couldn’t wait until the Midterm Review and Supplementary Budget.
“Something had to be done to ameliorate the social economic condition of the civil servant who was facing eroded salaries against skyrocketing prices, some of them asking for hard currency, so what we then have by way of a package was simply to come up with a cushioning allowance, a Covid-19 reprieve that was given to civil servants. The expectation was that once that is done for civil servants then the rest of the sectors in the economy will follow suit because the predicament of the civil servant echoes the predicament of other employees except a few other categories.”
Furthermore, Mr Charamba said of the five distinct scenarios that the Ministry of Finance and Economic Development had, they settled with the option of giving civil servants US$75 with the overall intention of maintaining economic stability.
“The Finance Ministry computed a basket of basics, which is what gave them that figure and they also looked into the inflows of foreign currency, the cost of the goods and what the economy could afford.”
Zimbabwe has around 330 000 civil servants, and taking into consideration that a family of five would be expected to live on depressed income, the Government saw it fit to cushion its employees through the US$75 allowances and the salary increase.
And to guard against the potential misuse of the US$-denominated cushion allowances, that come to a combined US$32 million per month for both civil servants and pensioners, the Government decided to secure the money through forms of FCA accounts.
Key considerations that the Government took include the market shocks implied in an increase on its wage bill from 30 percent of annual revenue to 40 percent.
Apart from having to contend with an increased wage bill, Government, which is already stretched by the novel pandemic, that entails lots of imports, also wanted to minimise the disruption on its balance sheet.
The increased demand for goods and services on the market that will be brought by increased earnings by civil servants will also act as a stimulus to economic growth, through demand-led economic recovery, Mr Charamba said.
“If that money to civil servants is left uncontrolled it would feed into the black-market and also it would also result in flight of foreign currency to neighbouring countries. Once that happens, this country becomes a net loser by way of foreign currency earnings, add to that the other leakages, we will drift towards an anaemic situation. So we introduced a facility, which while enhancing the capacity of the civil servant, curtailed abuse of that facility. Not only curtail abuse but also harness economic growth, that is when we came up with plastic money.
Mr Charamba said the logic behind the plastic money is to ensure that civil servants get basic goods with the Government ensuring that utilities bills will be paid in local currency.
“We have made sure that basic utilities will be paid in local currency not in foreign currency. The idea is not to encourage a migration, from a local currency to a foreign currency, it is to give continued validity to the local currency and utilities are one such, you cannot say you want to settle your bills in foreign currency, that should be covered by the 50 percent salary increment,” said Mr Charamba.