Mr Charles Msipa
Happiness Zengeni and Golden Sibanda—
GOVERNMENT should consider reviewing labour laws to suit modern-day business trends, the economy and avoid eroding capitalisation finances.The current environment is characterised by unending labour disputes. These are largely centred on wages and general mistrust among key players and labour issues remain a huge constraint to economic growth among other factors. At present, Zimbabwe’s labour laws are not flexible and do not link remuneration to productivity.
Most companies have cited labour costs as the major drag on performance accounting for over 50 percent of company expenses.
Capacity utilisation has dropped to 39 percent and is expected to end the year in the low twenties. Confederation of Zimbabwe Industries president Mr Charles Msipa told The Herald Business that labour laws were eroding industry’s competitiveness.
“Labour laws are eroding competitiveness because regulations about retrenchments are not favourable. Retrenchment packages are very high. This requires revision in a US dollar environment. When a company gets into trouble, it cannot downsize because it cannot afford the cost. The cost is just too high and eventually the company goes bankrupt.
“Going forward there is need for reason to take play on salaries and wages from everyone. The cost of salaries and wages is not linked to productivity. However, (as industry) we are watching both salaries and wages to make sure that they do not continue to go out of line with productivity,” Mr Msipa said.
While there has been price correction of selected goods consistent with an economic environment characterised by tight liquidity and low capacity utilisation, labour costs have continued to rise, putting further strain on company profitability and subsequent ability to invest further in the business.
Wage negotiations are done at industry level and Government does not have a regulatory role. Prior to the Labour Relations Act amendment (Chapter 28:01), Government played a part in industry wages setting salaries using a grading system.
“However, this fell away giving rise to the National Employment Council, that’s why there are disparities in wages in various sectors. For example, the motor industry would pay a higher salary than transport operating industry. This creates headaches on collective bargaining,” said Ms Honour Makoni, an independent human resources consultant.
Ms Makoni warned of more company closures triggered by unsustainable wage bills saying high labour costs were affecting the pricing of local commodities, making them vulnerable to cheap imports. She said there is need to bring together captains of industry and workers representatives with Government playing a conciliatory role to work out a solution which links wages to productivity.
Recently NMB Holdings chief executive Mr James Mushore said the laws adopted in the 80s are now coming to haunt businesses.
“We need to wake up to the fact that things have changed. On retrenchment costs, we have these ridiculous labour laws from the 1980s that are now coming to bite us, we need to review them and move with time,” he said.
Mr Mushore gave an example of Bindura Nickel Corporation which when it finished its retrenchment exercise the costs thereof were higher than the group’s market capitalisation.
He noted that when NMB retrenched, a third of capital raised from shareholders went to retrenchment costs.
Mr Mushore said with multi-currency, the economy was now exposed to the real world; as such companies now have to compete on a global scale.
However, this would not be possible as the country’s industry is characterised by expensive labour, high production costs, old machinery and technology.
Finance Minister Patrick Chinamasa in his budget statement in December said Government was reviewing the labour law to make it easier in the hiring of employees and increase productivity.
“I am, therefore, calling upon my colleague, the minister responsible for labour, Honourable (Nicholas) Goche, to seriously consider amendments to the Labour Act that relates work to productivity,” Minister Chinamasa said adding: “It is also necessary that we introduce in our labour laws flexibility in the hiring of workers, as well as alignment of wage adjustments to labour productivity.”
Minister Chinamasa said the changes were to make the laws “flexible and linking remuneration to productivity, that way promoting interests of both the investor and employees”.
The Labour Relations Act, in its current form, makes dismissals and retrenchments a slow process as employees have to go through a number of hearings. The hearings start at company level and a dissatisfied party can appeal to labour courts.
Failure to follow laid down procedures in dismissing an employee has in the past cost companies dearly as they have to pay damages in lieu of reinstatement.
However, the Zimbabwe Congress of Trade Unions has warned that the Government’s proposed move to introduce labour market flexibility and productivity-linked wages could trigger labour unrest in the country.
ZCTU acting secretary-general Mr Gideon Shoko recently petitioned Public Service minister Nicholas Goche demanding that he convinces Finance minister Patrick Chinamasa to drop the proposal which was announced in the 2014 National Budget statement last month.
Mr Shoko said the proposed relaxation of labour laws was tantamount to enslaving workers by seeking to “re-introduce colonial-era labour laws”.