Zimbabwe: Zimdollar Return - Chickens Are Coming Home to Roost

WAGE disputes, which include the standoff between President Emmerson Mnangagwa's government and teachers, are the culmination of a premature decision by government to re-introduce the Zimbabwe dollar last year.

The majority of teachers have downed tools since schools reopened last month citing incapacitation. This has angered Mnangagwa, who then said his government was being held to ransom and threatened to withhold salaries for the striking educators.

The teachers' strike comes soon after health workers went on a strike for more than two months decrying inadequate salaries.

The Zimbabwe Congress of Trade Unions have held lunchtime demonstrations every Monday against the erosion of wages as a result of inflation which has galloped past 700% and is the second highest in the world behind Venezuela.

In June last year, government introduced the Zimbabwe dollar as the sole legal tender for domestic transactions banning the use of the multi-currency regime through Statutory Instrument 142 of 2019. This was done without vital benchmarks being met.

This includes attaining a sustainable GDP growth rate of at least 7%; low and stable inflation; reducing the high debt ratios to very low and sustainable levels; increasing the level of savings and investments to at least 25% of GDP; reducing the balance-of-payments and at least six months import cover.

The Zimbabwe dollar, however, rapidly lost value resulting in the erosion of pensions and incomes denominated in the local unit.

Government has since made a major climb down by allowing the use of the United States dollar for domestic transactions initially as a measure to ameliorate the impact of the Covid-19 pandemic in March this year. The government later allowed the dual use of the local currency and forex for transactions through Statutory Instrument 185.

However, the return of the multi-currency regime has resulted in a major mismatch between prices and wages. Most workers both in the public and private sectors, who are paid in local currency have suffered a major reduction of disposable income as their salaries cannot keep up with the price of goods and services indexed against the United States Dollar.

The amount of money an average household of five requires to purchase both food and non-food items, commonly referred to as the total consumption poverty line (TCPL) has risen to ZW$15 572,85 since June according to national statistical body, Zimstat. This is a figure beyond the reach of most workers who are paid in the local unit.

Government meanwhile has boasted of a surplus of ZW$800 million which it says is as a result of the austerity measures they have put in place. This is at a time when most government workers are failing to make ends meet which has led to increased demands for wages to be paid in foreign currency. Teachers are demanding that they be paid a minimum of US$520, a demand government has said it cannot afford.

For economist Godfrey Kanyenze, the current wages deadlock between teachers and government shows that the chickens are coming home to roost.

"I think that the worker has had to bear a disproportionate burden. Although government has allowed trading in both local and foreign currency, the worker is being paid only in the local currency," Kanyenze said.

"The workers are incapacitated. It is important for government and workers to negotiate before decisions that affect them are made. This is what happens when you do not take each other seriously. If there are sacrifices to be made, those sacrifices have to be agreed upon not this top down approach. This is the problem of austerity without dialogue. The chickens are coming home to roost."

The dwindling income as a result of the erosion of the local currency has been keenly felt by business.

Retail outlets and corporates are reeling from a major reduction in sales volumes with some facing closure as a result of shrinking disposable income.

Figures availed by beverage manufacturer Delta and major retail outlet OK Zimbabwe reflect the impact of shrinking disposable income to the market with both recording a considerable decline in sales.

Labour market analyst and former executive director of the Employers Confederation of Zimbabwe, John Mufukare says the current standoff as a result of wage erosion, demonstrates that there are no shortcuts in turning around the economy.

"What is happening in the civil service is a manifestation of the Zimbabwean dollar being brought in without the supporting fundamentals, which is shockingly sad," Mufukare said.

"Government is trying to take shortcuts by bringing changes without paying creditors and shortchanging workers. There are no shortcuts to reviving the economy."

More From: Zimbabwe Independent

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