Home » Industry » Collective Bargaining in a Challenging Economy

“We need to balance the economy first and increase salaries later. It will be a mistake to increase now because the economy can’t sustain any salary increments. People are just being paid for going to work or for activity and not productivity.”

The Herald edition of 30 January 2015 reported that according to the Reserve Bank of Zimbabwe Governor, Dr J Mangudya “Zimbabweans should not expect salary increases this year because the economy can’t sustain them.” This report came after the Reserve Bank Governor had addressed editors from media houses across the country at his office on 28 January 2015, where he said there was no scope to increase salaries as there is not much productivity taking place. Dr Mangudya was quoted saying “We need to balance the economy first and increase salaries later. It will be a mistake to increase now because the economy can’t sustain any salary increments. People are just being paid for going to work or for activity and not productivity.” The RBZ chief further said that most companies are in a catch 22 phase because it is more expensive to fire a person or retrench than to keep him working.

In this article, the writers will make an attempt to analyse economic challenges faced by the Zimbabwean industries, look at collective bargaining agreements for 2014 and present highlights on the legal framework pertaining to collective bargaining in the Zimbabwean context.

Economic Challenges faced by the Zimbabwean industries

According to the Confederation of Zimbabwe Industry (CZI) Manufacturing Sector Survey for 2014, “the current challenges facing the economy are so intertwined that sometimes it is not easy to separate the causes from effects. It is, however, important to make sure that the challenges are properly contextualised and diagnosed in order to come up with appropriate and relevant solutions to underpin economic recovery”. The interwoven economic challenges include the following:

Tight liquidity conditions

Company closures

Rising formal unemployment

Low production levels

Non-performing loans

A disproportionate trade balance.

The CZI survey reported that due to the persistence of negative factors as the RBZ Governor rightly points out, it is clear that the panacea to the challenges that the economy is facing is to stimulate production for economic recovery and this can only be achieved through pursuing consistency, transparency and predictable economic policies coupled by g support from Government towards reducing the cost of doing business. The current challenges facing the economy are intertwined but we shall contextualise economic challenges that are directly related to Collective Bargaining and Wage negotiations in Zimbabwe.

a. Low capacity utilisation

Capacity utilisation is the percentage of the firm’s total possible production capacity that is actually being used, in other words, it refers to the relationship between actual output with the equipment to the potential output. The CZI’s manufacturing Sector Survey for 2014 reported that average capacity utilisation in 2013 was 39, 6 percent which dropped down to 36,3 percent in 2014. In the 2014 budget statement, Finance Minister, Honourable, Patrick Chinamasa stated that manufacturing sector activities remained subdued in 2013 at 39,6 percent down from 44,9 percent in 2012.The average capacity utilisation of 36, 3 percent in 2014 shows a decline of 3, 3 percent from the average in 2013 of 39, 6 percent. The survey stated that major capacity constraints are as follows:

low local demand 28,8 percent

working capital constraints 26,5 percent

competition from imports 14,2 percent

antiquated machinery and machinery breakdowns 7,3 percent

drawbacks from the current economic environment 7,0 percent

high cost of doing business 6,2 percent,

shortage of raw materials 6,2 percent and

power and water shortages 3,8 percent.

Finance Minister, Patrick Chinamasa stated in the 2014 budget statement that the Zimbabwean economy had been affected by many factors which include a tight liquidity situation, asserting that liquidity constraints were reflected in declining money supply growth and low financial intermediation, resulting in weak aggregate demand. Most companies from various sectors have failed to pay employees’ salaries for several months which have resulted in non payment of wages being a common dispute referred to conciliators and arbitrators for settlement.

Minister Chinamasa also stated that “Government had already alluded to the need to review the country’s existing labour laws which tend to be skewed in favour of employees, without taking due cognisance of productivity and the capacity of companies to pay. This has contributed to numerous company closures and is also constraining potential investment in the country.”

While announcing the US$4 billion budget last year, the Finance Minister stated that 55 000 workers had lost their jobs in the past 4 years as 4000 companies closed shop. According to a 2014 employee confidence survey carried out by Industrial Psychology Consultants, employee confidence had dropped to 39,16 percent in October 2014 from 60,35 percent in 2010 amid pervasive company closures.

Most companies have found it difficult to retrench staff in situations where the companies have failed to sustain their labour costs.

For instance, a report from the local press in 2014 indicated that one company had to recall retrenched workers because it could not afford to pay them. Consequently, the resultant effects are judiciary management, removal of benefits, increase in litigation, applications for wage exemptions and rising unemployment.

Minister Chinamasa said with regards to public sector labour costs, “Current expenditure will account for $3,628 billion of which employment costs will require about $3 billion, representing about 73 percent of the total budget.” In the private sector, the issue of labour costs and their negative impact on business viability remains a challenge for industry. Major reasons cited in the CZI 2014 Manufacturing Sector Survey account 85 percent to wage negotiations and 7 percent to staff recruitment.

In 2014, wage negotiations in various sectors were conducted, resulting in percentage increments per sector with outcomes given below: Insurance – 4 percent, Ceramics – 14,3 percent, Tourism – 5,5 percent, Mining – 5 percent, Pharmaceuticals – 3,5 percent, Engineering Iron and Steel – 2 percent, Transport operating – 4,5 percent, Brick making and clay products – 5,14 percent, Tobacco – 7,5 percent, Lumber milling amp timber processing – 1 percent, Paints and Printing inks – 2 percent, Air transport – 0,82 percent, Sugar milling – 6,25 percent, Agriculture – 10,77 percent,Battery – 2,5 percent and Printing -4,5 percent.

Some NECs agreed to extend their 2013 wage agreements to apply in 2014 .These include Cotton, Motor, Railways, Rural District Councils, Grain Marketing Undertaking, Clothing and Communication and Allied.

Six NECs namely Motor Vehicle Manufacturing, Grain Milling, Rubber amp Allied, Glass manufacturing, Pulp and Paper and School development associations and Committees were not functional owing to various challenges.

While some sectors were not able to break deadlocks, Seven NECs were still to negotiate during the last quarter of 2014.

The Legal framework on Collective Bargaining

The Constitution of Zimbabwe

The Constitution of Zimbabwe Amendment (No. 20) of 2013 specifies that every employee is entitled to just, equitable and satisfactory conditions of work. Section 65 (5) of the Constitution stipulates that “Except for members of the Security Services, every employee, employer, trade union and employeeemployer’s organisation has the right to engage in collective bargaining.”

The Labour Act (Cap 28:01)

Sections 25 and 74 of the Zimbabwean Labour Act, Chapter 28:01 provides for collective bargaining agreements by employers and either workers committees or trade unions. Furthermore, good work has been carried out by social partners who have submitted to Cabinet thirteen (13) principles aimed at harmonising our labour law in order to create a more enabling environment for social economic transformation driven by the dynamics of the labour market.

Principle number two (2) of the proposed amendments to the Labour Act (Cap 28:01) seek to link Section 25 and 74 of the Labour Act with Section 65 of the Constitution of Zimbabwe Amendment (No. 20) of 2013 which gives every employee the right to engage in collective bargaining in line with ILO Conventions. The proposed amendments are as follows:

i. Section 25 and 74 are to provide for collective bargaining, taking into account needs of workers and their families, general wage levels in the country and living standards of social groups. Levels of productivity and economic development are to be included.

ii. Amendment of Section 25 and subsequent establishment of Productivity Institute.

iii. Amendments to Sections 25, 74 and 81, allowing for non-registration of ‘unreasonable or unfair’ collective bargaining agreements.

iv. Amendment of the Public Service Act Sections 19, 20,24, 31 and 32 Health Services Act Sections 13,14,16, 26 and 27 in order to provide for collective bargaining agreement processes as promulgated in The Constitution of Zimbabwe Amendment (No. 20) Section 65.

The anticipated implications of the proposed amendments are that organisations will pay for productivity and value of work done, the employer will be required to resolve more social issues and there will be perpetuation of the old Poverty Datum Line argument.

What is the way forward?

Industries in Zimbabwe are under serious threat. Deindustrialisation has reached catastrophic levels, with dire consequences to the state of the economy.

However, when considering the way forward, compared to other African countries, the Zimbabwean economy is highly discerned by a broad-based potential for recovery in various sectors such as mining, services and manufacturing, with the mining sector emerging as the main sector of autonomous growth.

The restructured agricultural sector also has the potential of supply-response to improved conditions, as well as tourism.

Growth in the manufacturing sector is however heavily reliant on the internal demands generated by these two main driving sectors. With ger policies and favourable legal and taxation regimes in the mining and agricultural sectors, positive downstream effects can be experienced in the manufacturing and service sectors.

It is our serious view here that the remarks made by the Reserve Bank of Zimbabwe Governor concerning pay increases in 2015 are pertinent to planning the way forward, but nevertheless, it is highly recommended that key stakeholders be engaged for relevant consultations.

Matthias Ruziwa and Alyson Martens are experienced and growing Strategic Human Resource Practitioners. Both are practicing in the Midlands Province, City of Kwekwe. You can contact either Matthias or Alyson at the following email addresses:

Source : The Herald