IN CASE OF EMERGENCY, KNOCK OUT LABOUR!

IN CASE OF EMERGENCY, KNOCK OUT PANEL! This inscription, usually in red and unambiguously bold and visible on windows, is a very common sight in almost all commuter omnibuses in Zimbabwe. The 17 July Supreme Court judgment that upheld the earlier Labour Court that ruling that allows employers, at law, to terminate employment contracts on notice can be likened to these emergency exit windows. Struggling employers, with this precedent in hand, have not hesitated to put it to good use. The past week has seen massive lay-offs and painful contract renegotiations for employees as employers took advantage of this very rare window of opportunity that, considering its consequences and contradiction with Zim-Asset targets on employment creation, may be forcibly shut by government without notice. The situation has been compounded by the earlier announcement in April that the Retrenchment Board was tightening retrenchment regulations to make it more difficult for companies to retrench.  

The Retrenchment Board, with that announcement, had surely dampened the spirit of survival and these statements were read by many as prescriptive death sentences on struggling companies gasping for breath and choking under the burden of excessive and unproductive labour. Therefore this emergency exit window could not have come at any better time, and indeed the rate and haste at which companies are jettisoning excess labour reflects the excessive pressures that had build up in industry over the years.

Rightly so, the government and policy makers have a very good reason to be very worried about the massive lay-offs. Official unemployment, which already is very high, is bound to get worse. At a time the nation has been battling with the proliferation of vendors and informal traders, the current wave of private sector mass retrenchments is not going to make the situation any better.  The government, although being the single largest employer employing around 550,000 people, has no capacity to create direct employment opportunities that will absorb the many thousands of workers that will be on the streets in a few weeks.

In any case, the government has its own challenges in sustaining its huge wage bill and related recurrent expenditure that gobbles 92% of its revenue. If anything, the government should be very worried with its wage bill to the extent that it should be considering a significant civil service reform to downsize its numbers and create breathing fiscal space for capital projects that have higher multiplier effects on private sector job creation. With no social safely nets available to cushion the jobless, it is indeed genuine worry for the government seeing an upsurge in unemployment numbers.  And therefore the crisis meetings by the Minister of Labour and Social Welfare to try and find a soft landing approach to avoid the unraveling catastrophe are understandable.  

Unfortunately most of the employers jettisoning excess labour via the emergency exit window do not share the same concerns as government. And indeed they are justified! Most of the companies that have seized this opportunity to wield the axe swiftly have done so not because they loathe paying retrenchment packages. The fact remains that they have no capacity to do so and would not be having, in any foreseeable future, the capacity to do so as fortunes do not change easy during these deflationary times. If anything, the operating environment has been getting more difficult for these companies that are finding themselves on the wrong side of competitiveness. In some of the unfortunate instances, the employees would have gone for months without salaries and to therefore posit that they would get meaningful retrenchment packages without taking the route of forced liquidation of the company would be nothing more than expecting miracles.  

The onerous retrenchment procedures and awards that have been part of terminating employment in Zimbabwe have largely been viewed as punitive, insensitive and designed to serve the interests of the labour at the expense of employers. Indeed history has too many case studies on how companies assets have been stripped, attached and value destroyed on account of petty procedural missteps in handling disciplinary labour issues. Objectively, entrepreneurship and labour are all factors of production that cannot exits in isolation of each other and therefore they should be more or less equal and at best, complementary. Equally, it is very important to note that it is entrepreneurship that ignites first and only after that does it then attract labour. Therefore common sense will dictate that creating an environment that protects and allows entrepreneurship to flourish will inadvertently attract more labour and reward it competitively, more so with the help of the government that would be responsibly intervening in setting minimum wages and other conditions of service. 

Considering the mobility of labour in highly competitive environments, the employees become much better off and with that reflecting in the economy; more capital will flock in, igniting more entrepreneurship fires and creating more jobs.   

Although the policy makers and the general public may be having false comfort in people being employed, the fact that most employees are not getting salaries for months unending or are being underpaid is good enough a policy worry and reflects structural challenges in the economy. Continuing to go to work and accruing wages that would never be paid even after a company is liquidated is, from a progressive perspective, a worse evil than allowing the companies to terminate excess labour flexibly and carry labour burdens they can afford to pay. The emergency exit route that allows companies to give flexible and affordable notice to terminate contracts may therefore be the answer to nurturing an environment that will eventually create more jobs and up productivity for the economy. Surely this is better and more progressive than the rigid and arduous processes that, in pursuit of imaginary justice to please a select group, may eventually leave the whole country with corporate tombstones and a frustrated mass without jobs. 

The sad stories at Zisco, NRZ and CSC, among many other parastatals that are carrying huge unproductive labour burdens, have been among the major contributing factors that have seen parastatals making losses, as reported recently in some sections of the media, in excess of $470 million since 2012. And surely that is not a small leakage for a country that rakes in around $3.8 billion in government revenue annually.

Positive attitudes towards work and strong self-motivation are some of the major drivers of productivity in highly competitive labour markets around the world and there is very little doubt that these traits are in huge deficit among most Zimbabweans. The shambolic state of large sections of the private sector, municipalities, parastatals and government departments leaves very little room for one to argue otherwise. And it is no doubt that the committee set by the Ministry of Industry and Trade to interrogate factors negatively affecting the ease of doing business in Zimbabwe will look at ways to try and influence attitudes at the workplace to be more positive and hence productive.  With that background, it is therefore clear how the  emergency exit window that can terminate employment contract on notice will usher in a new wave of responsibility that will not only keep everyone on their toes, but will also ensure that the attitudes at the work place will become more centred towards productivity than anything else. 

Whilst the public outcry on the mass lay-off has largely been sympathising with and only singling out shop-floor workers and low level employees as the vulnerable casualties under the new dispensation, the silver lining in all this rests in the ability of shareholders and boards to crack whip on incompetent directors and CEOs. The corporate sector in Zimbabwe is replete with arrogant and largely incompetent private and public sector executives that, to a large extent, have been largely responsible for the mess that most of the struggling companies are in today. It is very amazing that at a time inflation is now in sub-zero ranges and foreign currency “abundant”, most companies are now going bankrupt when, ironically, the same companies survived hyperinflation for 7 years to December 2008.  It is therefore clear that the hyperinflationary environment insulated companies against costs and inadvertently, companies were on auto-pilot. 

The time is now to manage costs, innovate continuously and borrow responsibly. Those companies that have lost this balance are in big trouble and without blaming everything on the environment, the time has come to hold executives accountable and surely the ability and flexibility to sack on notice should completely change the leadership culture in this country and create better run institutions. The differences in management styles explain for example why other banks have collapsed and disadvantaged depositors and yet the same banking sector has other banks such as POSB that have weathered the storm and recently declared a divided to the Government, its shareholder. Blue Ribbon, on the other hand, collapsed whilst National Foods, in the same industry, has survived and is doing much better!

Yes, the deflationary environment is tough, treacherous and competitive but it always boggles the mind why, in this “stable” environment, there are more tombstones littered across the corporate cemetery than those got buried during hyperinflation. And therefore to blame executives and their boards for failing to steer their ships in such clear weather is not to err. On account of their poor judgment, incompetency and recklessness, it would surely not be asking too much to request executives to leave on notice empty handed, no matter the number of years they would have served and running it down the company.  Rewarding failure has never been a good practice the world over and for Zimbabwe to pay a blind eye to such precedents would be unfortunate. Even if, as a nation Zimbabwe decides to break rank and continue to create safeguards that allow for rewarding failure and mediocrity at the workplace, the world will still watch, turn its back on us and we will never have followers and admirers.  

It is instructive therefore that he Minister of Finance has been labouring the point on the urgent need for labour law reforms, whilst recently the Hon Kasukuwere, the Minister of Local Government and National Housing, was reported in the media lauding the emergency exit route in jettisoning non-performing local authorities bosses caught napping on the wheel. And for who he is, it is not surprising that Hon Kasukuwere can actually be among the first in government to exercise the option in setting the point straight. And that is not bad for the government.

The ruling, although creating anxiety for the government as job losses spike, will in fact give the government enough teeth and courage to implement structural reforms on salary and benefits for executives in public institutions in line with productivity. This is more true, whether right or wrong, for those that have been vehemently resisting slashing their salaries in line with the Cabinet directive to have salaries for public servants and parastatals bosses pegged around $6,000 per month. 

In summary, whilst unfortunate to the workers in the short term, the recent mergency exit option, on the basis of objective assessment, will, in the medium –to – long term, stabilise the economy and create an environment that will nurture more decent and stable jobs whilst providing a more sustainable economy and capital friendly environment that will attract more capital. The government should therefore be able to carefully consider not only the immediate benefits or losses, but to be more circumspect and make rational choices that will make Zimbabwe not only attractive to international capital, but as well promote local investment and protect the fabric of domestic investors. At a time the government is making efforts to court international investors, it should put more efforts to safeguard that which has been sustaining employment at a time international investors have shunned Zimbabwe on account of the sanctions. The current investors operating in Zimbabwe and struggling to stay afloat have sustained government with tax revenue whilst providing jobs for the masses over the years and therefore protecting this domestic industry and giving them breathing space should be of paramount importance. Although this has rendered trade unions less powerful, with labour law experts, arbitrators and HR practitioners that have been surviving on the lucrative disciplinary cases and disputes having to ply new trade, life has to go on. It’s the new age of dynamism.  And in its wisdom, the market carefully awaits government next steps that will signal whether it is ready to embrace reform the business environment in Zimbabwe.