LAST week, Reserve Bank of Zimbabwe (RBZ) governor, John Mangudya, unveiled the monetary policy statement for the current year against the backdrop of a worsening economy plagued by a stubborn liquidity crunch that has ruined prospects for recovery.That liquidity crunch, inevitably, has created unhealthy labour relations in the country, with workers getting increasingly agitated over the erosion of disposable incomes, while employers, among other things, grapple with rising losses spurred by lack of competitiveness due to antiquated machinery that cannot be replaced because of unavailability of cash.
Most of the struggling businesses are highly geared, and the majority of them have collapsed, leaving thousands of workers on the streets.
Mangudya’s policy statement appeared conscious and alert to the problems affecting both workers and employers, and sought to tackle this grave situation in a novel manner that should be applauded.
Rather than call for salary cuts, which could be turbulent and in some instances illegal, Mangudya proffered what many will agree was sound advice.
He said his considered view was that the national economy was not able to sustain any further increases in wages and salaries and that the welfare of consumers and employees should be addressed through a reduction of prices, enhancing the purchasing power of the current wages and salaries.
“We need to move away from the psychology or concept of money illusion… think(ing) in terms of the amount of money they have, rather than in terms of its value….This way even those not working would have their welfare increased as they would be able to buy more from a United States dollar,” Mangudya said.
Indeed a comparison of selected economic indicators between Zimbabwe and the region given by Mangudya revealed that Zimbabwe’s average minimum wages were much higher than in other regional countries.
However, the high cost of living in Zimbabwe negates the comparative advantage, and increasing wages and salaries would be followed by commensurate price increases.
We therefore totally agree with Mangudya’s view, but firmly believe government should lead by example and demonstrate to the nation its faith in the new trajectory on pricing.
This should start with a reduction in toll gate fees, which were doubled controversially only a few months ago, as well as a downward revision in costs for utilities which have been the biggest cost to the industrial and commercial sectors.
The recent increase in toll gate fees increased the cost of logistics, and consequently the price of goods.
A review of the recently increased duty on fuel would be another starting point.
That way, we believe government would gain the moral high ground to persuade everyone else to act in the national interest.
Government has been the biggest letdown to economic recovery and it’s time it showed commitment.