Mugabe promises pie in sky

Mugabe promises pie in the sky

The Zimbabwe Independent – Editor’s Memo Faith Zaba

April 22, 2016 in Analysis, Comment, Opinion

President Robert Mugabe (Photo added courtesy Nehanda Radio)

PRESIDENT Robert Mugabe's promises this week to award civil servants minimum wages in line with the country's poverty datum line (PDL) were not only populist and reckless, but also showed that when it comes to his poverty of ideas, reality is stranger than fiction.

What Mugabe was saying in essence is that he wants to give a salary increment to civil servants at a time when the government is not only broke but is also failing to pay them within the due dates. It is still to pay bonuses to the majority of its 550 000-strong workforce.

Zimbabwe's PDL stands at US$489 as of August 2015, while the least paid civil servant earns about US$375 per month.

"It is the desire of government that salaries progressively match the poverty datum line," Mugabe told thousands of people gathered at the country's 36th Independence Day celebrations on Monday in the capital.

At a time the country is reeling from a tight fiscal squeeze characterised by shrinking revenues, Mugabe's promises are mind boggling.

Government has been forced to delay civil service salary payments every month due to a deep fiscal crisis. Well over 80% of its revenues go to the wage bill.

This is a worrying trend in a country run on a cash budget and where the tax collecting agency the Zimbabwe Revenue Authority (Zimra) is continuously missing its set targets due to declining economic activity.

Zimra missed its annual tax collection targets for 2015 by US$220 million;  falling 3% below 2014 figures at US$3,5 billion, an indication that there is very little fiscal space and room for populist promises. Against such a background, Mugabe needs to wake up and realise that the economy is fast imploding.

Civil servants need to be paid well, but government is broke. Besides, salaries have to be linked to production and internal economic conditions.

It's basic economics.

All economic indicators are showing signs of an economy in deep trouble.

Industry capacity utilisation is at 34,3%.

Industry is operating with obsolete equipment and capital to retool is costly.

A total 4 610 companies closed down between 2011 and 2014, resulting in the loss of 55 443 jobs due to a myriad of operational and macro-economic challenges. The few exporting companies that have not shut down are struggling for survival because they are not competitive.

The country's import bill is unsustainably high. Liquidity is tight in the economy with banks holding back on lending in the wake of rising credit risk in the market that prompted the central bank to create a facility to absorb bad loans. Banks don't have cash. Yes, cash.

Currently, pensioners and even war veterans are owed millions in unpaid benefits. If the economy is in distress, which the president had no choice but to acknowledge, why make such ridiculous  promises? Just for elections as he has done before? It is now clear that Mugabe has run out of positive things to say and that he has resorted to promises which cannot be kept, a further indictment of his failed leadership.

Mugabe's promise is in stark contrast to Finance minister Patrick Chinamasa's objective to cut the wage bill from more than 80% to 40% in line with agreed benchmarks with the International Monetary Fund. His promise to civil servants also defeats the purpose of the recent civil servants audit by the Ministry of Labour to streamline operations and cut down the astronomical wage bill.

Zimbabwe has perennially revised its annual budgets owing to revenue underperformance as companies continue to struggle. A US$150 million budget deficit has been forecasted for this financial year.

Mugabe is once again proving through his electoral demagogic promises that he remains economically semi-literate despite his degree in economics, which explains why the economy is in ruins.