RESERVE Bank of Zimbabwe (RBZ) boss John Mangudya yesterday said Zimbabwe’s economy has no room for salary increments, as they will further kill the economy.
Presenting his monitory policy statement, Mangudya said the RBZ had considered that the national economy was not able to sustain any further increases in wages and salaries and that the welfare of consumers and employees should be addressed through the reduction of prices, deflation, so present wages buy more – enhancement of the purchasing power of the current wages and salaries.
“We need to move away from the psychology or concept of money illusion, which states that people think in terms of the amount of money they have, rather than in terms of its value,” he said.
“We now need to think in terms of value.
“This is why even those not working would have their welfare increased as they would be able to buy more from a US dollar.”
Mangudya said it was imperative to note that Zimbabwe’s public wage bill as a percentage of revenue was higher than for all the regional countries despite the country having the lowest population with the exception of Botswana.
“Competitiveness of the national economy is not achievable without addressing the national economy’s cost drivers,” he said.
“These cost drivers include, but are not limited to, municipality tariffs, environmental management fees and some non-tariff barriers.
“Such fees and/or tariffs increase the cost of doing business in Zimbabwe.”
He said landlords would need to adjust rentals, especially in high-density areas where a room costs on average $70 per month.
Mangudya urged a reduction in prices of basic commodities which go into the consumer basket such as bread, tea, cooking oil, etc.
Businesses would need to review prices of such commodities.
“It is failure or bad faith by business to quickly review prices downwards that influence workers to demand higher wages and salaries that commensurate with the high cost of living,” he said.
Mangudya said another area that needed reform were parastatals, with emphasis on the synchronisation of overheads, delivery and revenues.
He said failure to synchronise these factors had tended to increase the cost of doing business, poor service delivery across the country, and failure by some parastatals and local authorities to be up to date with salary payments for their employees.
The RBZ boss said bonuses should not be viewed as an entitlement, but instead as a performance-related compensation and that employers, including the government, should put in place clear principles and, where necessary, notices for the payment or non-payment of such compensation should be effectively and timely communicated to the affected beneficiaries.