THE Confederation of Zimbabwe Industries (CZI) – the country’s largest industrial representative body – is calling for a 50 percent reduction in salaries to enhance the country’s competitiveness.
CZI is convinced that the majority of companies that are currently struggling to pull their weight in a dollarised environment could return to the black if government allows both public and private sector organisations to slash salaries by half.
To enforce the salary cuts, Busisa Moyo, president of CZI, said an enabling legal instrument was required.
“Our initial desktop review shows that if all institutions – government departments and private sector companies – were given the right, through a legal instrument, to reduce salaries by 50 percent, the results would be positive as it follows that 80 percent of businesses and institutions will move into an operating surplus position or net profit scenario,” said Moyo.
“Between 50 percent and 60 percent of products will become export competitive,” he added.
Moyo said slashing salaries would have a domino effect on other service providers that would also have to lower their tariffs, as these could no longer be justified in light of reduced disposable incomes.
“By reducing salaries to this level, we would see most utility costs reducing by between 40 percent and 50 percent,” he said, referring to electricity and water and municipal rates, among other charges.
“Government and companies would have funds for capital formation, savings and re-tooling.
“Other costs must come down to compensate for lower salaries hence the term internal devaluation. By doing the above, we will see more foreign direct investment as South Africa is about to enter into a financial storm of epic proportions. Zimbabwe should take advantage,” said Moyo.
CZI said the strengthening of the United States dollar calls for a rethink on the country’s salary structures more so in view of the difficult trading conditions across all sectors of the economy.
Moyo said a US dollar environment provided for an exchange rate risk free environment.
Economic observers said there was little doubt that government would be unwilling to tinker with salaries.
As the country’s largest employer, with 550 000 public servants on its payroll, government may not want to upset its employees who are already livid over poor working conditions and low salaries.
The US dollar is the most commonly used currency in Zimbabwe.
The currency was adopted in February 2009 when Zimbabwe ditched the defunct Zimbabwe dollar.
Other currencies which are in the multi-currency system include the South African rand, Botswana pula and British pound.
Of late, the greenback has been on a strong rally against other currencies such as the rand which last week fell to its lowest level in more than 15 years after breaching the US$1 to R16 mark.