Zimbabwe govt loses battle on the redollarisation of salaries

THE government has issued a circular allowing public entities to pay salaries and allowances partly in United States dollars, in a development that shows the state is losing the war of redollarisation.

In the past, the government banned the use of the US dollar before bowing down to pressure and reversing the decision.

The government has been maintaining a hard stance against the payment of salaries in US dollars, saying no country can develop while using the currencies of other nations.

However, in circular 4/2023, dated 19 July 2023, Corporate Governance Unit secretary in the Office of the President and Cabinet (OPC) Allen Choruma, advised public entities that there is a policy shift with immediate effect that allows them to pay salaries and allowances amounting to a gross of 40% of an employee's earnings.

Part of the circular reads: "With effect from July 2023, all public entities as defined under section 2 of the Act (Public Entities Corporate Governance Act [Chapter 10:31], public entities will be allowed to make part payment of salaries and allowances in both ZWL and US.,

"The part payment of salaries and benefits to employees of public entities shall be up to 40% of combined (both) gross and allowances. In other words, the aggregate portion payable to employees in USD shall be up to and not exceed 40% of an employee's gross salary and allowance.

"No employee shall be paid an agregrate of both salaries and allowances in excess of 40% of gross salary and allowances. The balance of 60% of salary shall be paid in the official local currency, the ZWL."

Public entities with no capacity to pay the 40% forex component were exempted from over-stretching themselves.

Boards of public entities were directed to ensure that "the remuneration of employees of public entities, boards of entities shall pay due regard in ensuring that such remuneration is reasonably fair and appropriate, is specified clearly, achieves the objectives to attract, motivate and retain staff, and further that particular attention to the entity's capacity to pay salaries and allowances in USD."

Each public entity board, according to the circular, is expected to come up with its own internal policy and modalities, subject to approval by its line ministry, on how the modalities on payment of salaries and allowances in both Zimdollars and US dollars will be handled, depending on the peculiar circumstances of the entity.

Choruma revealed that he was aware that some public entities had already redollarised but warned they risk penalties if caught.

"It has come to the attention of the unit that some public entities, without approval from the minister, had already started part payment of salaries and allowances in USD, and are reminded to comply with this circular as failure to do so will attract penalties as prescribed in the Act," he wrote.

In June 2019, Finance minister Mthuli Ncube issued a decree saying British pounds, United States dollars, South African rand, Botswana pula and any other foreign currency whatsoever could no longer be legal tender alongside the Zimbabwe dollar in any transactions in Zimbabwe.

In 2009, Zimbabwe had allowed the US dollar and other foreign currencies to be used as legal tender in the country after hyperinflation decimated the value of the Zimbabwe dollar like it has done at present.

In the latest circular, the government accepted that payment of wholly local currency salaries and allowances without the United States dollar component was no longer tenable.

"Whereas the Corporate Governance Unit has been receiving a lot of requests from the public entities for approval for payment of salaries and allowances in both the official Zimbabwean Dollars and United States Dollars to cushion employees from the effects of inflation and exchange rate movements which have eroded the purchasing power of salaries and allowances.

"And whereas in the recent months the Unit has observed the increasing number of resignations of key personnel and loss of motivation and drop in staff morale amongst employees of public entities citing poor remuneration and conditions of service thus compromising efficient service delivery to citizens.

"And further whereas the Unit while recognizing the need to enhance performance and service delivery in public entities, notes that these entities are not homogenous in terms of their size, revenue and nature of operations with some entities generating foregn currency to meet part of their operational costs in USD, while others do not recommended that boards of public entities be given some latitude to determine the modalities for part payment of salaries and allowances in both ZWL and USD, depending on the capacity of the entity to pay, and guided by the provisions of the Public Entities Corporate Governance Act.

"Now therefore cognizant of the above, the Minister responsible for the Act, in consultation with Treasury and line ministries concerned and having regard to Government's commitment in improving the welfare and conditions of its service employees in the public sector has approved part payments of salaries and allowances for all employees in public entities in both ZWL and USD in order to address the aforementioned challenges in conditions of service applicable to employes of public entities, and further bearing in mind the entities capacity to pay such salaries and allowances in both ZWL and USD guided by conditions outlined hereunder," reads part of the circular.