Home » General » Call to Break Salaries, Production Mismatch

FBC Holdings chairman Mr Herbert Nkala says there is need to break the vicious cycle of the mismatch between salaries and production to save firms from collapse.

Mr Nkala said in an interview this week that this strategy worked for FBC Holdings and a former associate he chairs, Turnall Holdings, when they adopted it four years ago.

As a result of this painful, but necessary action, Mr Nkala said the group was now in the top 10 rankings of the most profitable and well-managed companies in Zimbabwe.

As such, he said there was need to break the circuit of this debilitating crisis fanned by the mismatch between production and salaries that has resulted in significant loss of jobs.

In November last year, the National Social Security Authority estimated that 10 companies closed every month while statistics from the Retrenchment Board revealed that more than 5 600 workers had lost their jobs in the first 11 months of that year.

Mr Nkala said the salary cuts, by as much as 50 percent at FBC Holdings, were as a result of mutual agreement between workers and management and spared the least paid workers.

“Management and clerical staff reduced their salaries by 50 percent they did not touch NEC workers.

“Salaries were reduced for a year and during that year the company recovered to become one of the most profitable companies in the country,” he said.

“The sacrifices made by the company in that one year, saved the company from collapse and worked as a launch pad for sustainable profitability,” the FBC chairman added.

The basis of his proposal is that, on average, salaries and wages constitute 30 percent of firms’ production costs and when this reaches 50 percent, companies start to collapse.

Mr Nkala said it did not make sense for companies to complain about the challenges they faced when they continue to accrue wage and salaries arrears they could not settle.

Zimbabwe Stock Exchange listed Turnall Holdings, Mr Nkala said, is in exactly the same situation that its former controlling corporate shareholder was itself in four years ago.

The company has since borrowed a leaf from its former sister company with directors, senior and junior managers cutting their salaries by 50, 30 and 20 percent respectively.

“The impact of that is we are saving $120 000 per month and we say that in another 4-5 months, we will probably reverse that (unprofitable situation),” Mr Nkala said.

As happened with the reputable financial services group, Mr Nkala said, the salary

cuts would be reversed once the firm returns to profitability as that would no longer be necessary.

He said while there is equilibrium between salaries and production, solutions existed, but there were sacrifices to be made to keep standing until the good times return.

Source : The Herald