Back to Index

Zim's No 1 headache
Shakeman Mugari, The Independent (Zimbabwe)
February 28, 2008

View story on the Zimbabwe Independent website

At face value, news that security forces had been given a pay rise that will push their monthly salaries to a little over one billion dollars a month gives the impression that they are now getting a lot of money.

To anybody not accustomed to life in Zimbabwe a billion-dollar salary sounds like an obscene amount. This impression however only lasts until the seemingly huge figure is compared to what it can buy in real terms. It becomes even worse when one looks at how much the same amount will buy at the end of the month in light of Zimbabwe's galloping inflation which the Central Statistical Office reported to be 100 580,2% for January on a year-on-year basis.

Zimbabwe's month-on-month inflation has averaged 180% for the past two months. The month-on-month inflation rate is given by the percentage change in the index of the relevant month of the current year compared to the previous month. It indicates the average change in prices of the goods in the consumer basket.

For instance January's month-on-month inflation of 120,8% indicates the average price increase changes from December last year. In other words the same salary cannot buy the same commodities it did last month.

In specific terms it means that a Zimbabwean dollar today is no longer worth the same tomorrow.

According to the International Monetary Fund (IMF) Zimbabwe is now experiencing hyperinflation — a situation when month-on-month inflation reaches more than 50%.

So serious is the cost of inflation on the salaries that by the time it is received at the end of the month the amount will be worth next to nothing.

Even though most Zimbabweans might not know the academic definition of inflation at least they see what it does to their earnings.

For example, Norman Nerwande (34) was one of the soldiers who received a billion-dollar salary last week but instead of being happy he is depressed. The reason is that the amount is barely enough to buy the basics for his family of three.

The mathematics of it all is quite simple. Using the prices for this week Nerwande's billion-dollar pay cheque is only enough to buy two litres of cooking oil ($60 million), a loaf of bread per day for the rest of the month ($120 million) and a packet of meali-meal ($20million).

It will also pay rent for his three rooms in Budiriro ($80 million per room), four kilogrammes of meat ($40 million per kilogramme) and provide enough bus fare ($205 million per month). He will also be able to pay the city council rates, water and power charges which now require $250 million per month.

The amount is finished before Nerwande can cater for other basic commodities, clothing and school fees. Nerwande's problem is that these calculations are based on the prices that are valid for a week and in some cases a day.

As the month progresses Nerwande's money will only be able to buy fewer loaves and pay for fewer trips to his work at the Presidential Guard headquarters in town.

The list of the things that he can buy with the salary is getting smaller every day because of inflation. His situation will be even more desperate because the next salary which is due on March 18 will not be able to buy the same things that he bought this month.

"The salary is finished before it comes," said Nerwande.

This is the sorry situation that every worker faces in Zimbabwe. At the current average month-on-month inflation of 180% a billion dollars next month will only buy a bottle of cooking oil which will cost $168 million and pay rent for three rooms which will cost $224 million per room.

This list will be whittled down further by April and can only be enough then for a single room and a smaller bottle of cooking oil.

This means that Zimbabwean workers are continually sinking into poverty. No amount of salary increase can be enough under the current conditions where the Zimbabwean dollar is losing value everyday.

Analysts say it is now difficult for companies to motivate employees. "Very few workers now look forward to their salaries," said David Mupamhadzi, group economist for Zimbabwe Allied Banking Group.

"The reason is that in most cases the salary reviews are way below the inflation rate. Workers have also realised that inflation is not only eating into their current salaries but future earnings as well," Mupamhadzi said.

Mupamhadzi said in such situations inflation becomes a subtle tax. "The issue here is that while ideally workers must be paid per month but sticking to this arrangement disadvantages workers. It becomes a subtle tax on the worker."

Already some companies have started paying their workers weekly. The problem is, however, that not all companies will afford to pay their workers every week because of cash flow problems. For example some companies have a system where debtors pay after 30 days. This means that a move to weekly salary payments will disrupt the cash flow position.

Most companies are already distressed with the majority operating at below 10% of capacity.

Human resources consultant, Memory Nguwi, believes that there will come a time when people will not bother to come to work because their salaries are continually at the mercy of inflation. "It's a headache for most companies.

It will be difficult to justify coming to work because the wages are just insignificant," Nguwi said.

"Companies will have come up new incentives to motivate workers."

Some companies are supplying groceries to workers while others are reviewing salaries every month. Analysts however said even these methods might not be enough to encourage workers to stay on their jobs.

"Hyperinflation tends to render even these methods useless," said Mupamhadzi.

Other countries like Germany (after World War I) and Bolivia faced the same problems. For instance there was a time when prices would increase every few hours in Germany meaning that workers that got their monies in the morning would be better off than those that get their salaries in the afternoon.

The rich have also not been spared by inflation — fuel and property prices have skyrocketed.

Even those that earn in foreign currency will have to deal with inflation somehow. At the current rates at the parallel market the rand buys more in South Africa than it does in Zimbabwe even at the parallel market rate.

The concept of parity pricing has been skewed because of inflation.

"The biggest cause of inflation in Zimbabwe is now inflation itself," said Martin Tarusenga, a business consultant.

"The sad part of the Zimbabwe story is that those in power know what needs to be done but they just choose to do nothing," Tarusenga said.

Please credit www.kubatana.net if you make use of material from this website. This work is licensed under a Creative Commons License unless stated otherwise.

TOP