Unrealistic wage expectations hinder economy

WHILE Zimbabwe continues to benefit from negative inflation, unrealistic wage expectations continue to hinder the nation's economy, FBC Holdings chairman Herbert Nkala said at the launch of the 2015 edition of CASE Handbook on Wednesday night.

"While we as a nation continue to benefit from the fall in average prices, the cost of labour is yet to re-adjust. The reason that much of our industries can't compete in the field of exports is because our wages are too high given the level of productivity. These concepts go hand in hand."

"High wages are fine to reward high productivity. What we see in Zimbabwe today is that productivity isn't commensurate with current wage levels. Unrealistic expectations of what people should be earning, is the reason why Zimbabwe isn't working. If there was a proper re-alignment of wages to output, I think many of our industries could compete."

Nkala noted that Agribank CEO Sam Malaba had recently said that Zimbabwe had spent over $3 billion on grain imports since 2009.

"Ultimately the reason for this in a fertile land such as ours has as much to do with wages as it does with the weather."

The FBC chairman said the "most positive aspect" in the economy continues to be negative inflation, currently measured at minus 2.45 percent by Zimstat.

"In its results last week, OK Zimbabwe measured its average prices at minus 2.6 percent in the year to March 2015, and the forecast in this handbook is that we will be at minus 5 percent to 7 percent by year end. Since July 2013, OK has reported falling average prices, which backs up Mangudya's position that while liquidity remains tight, the dollar in your pocket gets you more and more as each year goes by.

Nkala said he was heartened to see that in the African Development Bank's report yesterday, the continent's lender is still expecting the economy to grow by 3.2 percent this year.

"Mining production was up marginally in the first quarter and tobacco prices have picked up a good deal since the beginning of the season."

While the ZSE did not have a great first quarter, Nkala noted that markets throughout the region have seen very low trading values since the beginning of the year.

"We will however, see our first listing in more than three years, as Masimba demerges its Proplastics business next month. This is a successful manufacturing company and I understand - in light of all the talk about deindustrialisation - that all three finalists for this year's Company of the Year Award are manufacturers."

Cafca won the Company of the Year Award and has consistently reported profits since dollarisation, which is no mean feat for a manufacturing company. Afdis and Natfoods were also contenders for the award.

Nkala said FBC regarded its sponsorship as an important contribution to the business community. "Not only is this a book of record, but it helps business understand what's happening in a region that we've long historical ties with."