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Against a backdrop where the Reserve Bank of Zimbabwe (RBZ) Governor Dr John Mangudya is calling for a freeze in salaries and a reduction in prices of goods and services, it is worrying that the Zimbabwe Congress of Trade Unions (ZCTU) has publicly registered its disquiet over the initiatives while ZESA Holdings is reportedly planning to increase its tariffs by six percent.

During his 2015 Monetary Policy Statement, Dr Mangudya said: “Given the lack of competitiveness and its negative effects on the economy, we do not see any room for wage and salary increases within the economy. Instead, the prevailing circumstances call for a downward adjustment in the prices of goods and services in order to promote competitiveness and ultimately for the recovery of the economy.”

Dr Mangudya’s proposal found support from the Zimbabwe Revenue Authority (ZIMRA) boss Gershem Pasi, who further proposed a cut in salaries, among other measures, saying: “Why not say cut by 20 percent across the board: cut the wages, interest rates, everything because it will be a social contract. We will give ourselves room to start the growth process.”

At a time the country is searching for solutions to bust sanctions and revive the economy, these well thought-out initiatives by Government through the RBZ, should be applauded.

They demonstrate Government’s commitment to improving the overall welfare of its people, despite the debilitating economic challenges gripping the country through the agency of sanctions.

If fully supported, such initiatives could breathe life into our limping industries, safeguard employment and boost Government revenues.

The price reductions could stimulate demand for locally manufactured goods and provide the much-needed bulwark against the incessant flow of cheap imports that are depleting the country’s foreign currency reserves and at the same time ravaging local industries.

However, these noble initiatives by Government could be derailed if competing and somehow contradictory interests from other sectors of the economy such as labour and business are not addressed. It should be appreciated that labour groups would continue to push for the improvement of the worker’s welfare and, naturally, this does not condone wage freezes or cuts.

On the other side, business is known to push for maximum profits and this too runs counter to any suggestions of price controls or profit cuts as entailed in the latest Government proposals.

Already one labour organisation has registered its opposition to Government’s proposal to freeze or cut salaries.

Reacting to the proposals last week, ZCTU secretary-general Japhet Moyo released a press statement that partly said: “while we agree that the economic situation in the country is abnormal with 92 percent of the Government revenue being channelled towards recurrent expenditure, we do not think that cutting salaries would remedy the situation. The Government must first get rid of thousands of ghost workers milking the Treasury.”

Such flaunting of defiance by the ZCTU heralds the resistance that awaits plans to reduce the cost of goods and services in the country.

We also heard contradictory signals coming from business. Reports that ZESA Holdings is planning to increase its tariffs by six percent in order to clear its salary arrears are a slap in the face of those spearheading the national cost-cutting initiative.

Without delving into the legal discourse shaping the planned ZESA tariff increments, it is indisputable that such an increase would have a big ripple effect on the prices of other commodities and services in the country.

An increase in electricity prices or of any other source of energy would definitely have an inflationary knock on all production processes in industries and at farms.

The contagion effect of such a move on the pockets of workers could be devastating and might further lend credence to perennial calls for salary increments by some workers’ organisations.

Also given the intermittent power supplies, an increase in electricity costs could also push away foreign investors, who usually require a steady supply of inexpensive electricity.

On this basis, an increase in electricity tariffs would clearly defeat efforts by Government to cut the country’s cost structure.

Source : The Herald