HARARE – Tuesday marked the first gear of the Foreign Currency Auction System by the government which is aimed at bringing stability on prices and exchange rate. As expected, there was a sharp fall in the value the domestic currency from the previously fixed exchange rate of US$1; ZW$ 25 to US$1: ZW$57.5. The rate will be applicable until the next auction determines another weighted exchange rate.
However, the labour fraternity has raised concerns about the negative effects of continued depreciation of the local currency on the real income of workers. Government and business will most likely not review wages and salaries frequently to realign them with weekly review on the exchange rates.
Peter Mutasa, the President of Zimbabwe Congress of Trade unions (ZCTU) raised concern on the whole auction system. He said ZCTU preferred a return to full dollarisation of the economy as any exchange rate regimes being implemented by government were not helping workers whose incomes are continuously being eroded by hyperinflation.
He branded the system ‘stupid’. He told FinX that on average, people are earning $2 500, which is also the minimum wage and yet most prices are indexed in USD$ terms. The continued depreciation of the currency simply translates to decrease of salaries in real terms. Mutasa said there was need for national dialogue as the government is continuously coming up with unilateral policies that are not improving the well-being of employees. “If there is continued derogation in the value of the local currency, we have no choice but to organise and mobilise workers for strikes.”
He particularly criticized the inconsistency in exchange rate policies, which he said were knee jerk reactions on the part of Government. He said there is no way the parallel market rate will converge with the official rate if the informal sector is still being excluded in forex trade decisions.
His colleague, Takavafira Zhou who is the President of Progressive Teachers Association of Zimbabwe (PTUZ) concurred with him in raising concerns over the persistent depreciation of the local currency. He said that the little US$75 that their members are set to receive from government might be paid transacted at a rate determined by the auction system exchange rate.
“There is no way an exchange rate from the government will match the parallel market rates. We will continue to push for salaries to be paid in United States dollars as it was before 2018.’ He added that the economy was on its way to dollarisation and it was prudent for the government to pay teachers and government workers in USD. He particularly said a teacher must earn a basic salary of USD550 and do away with the worthless and valueless local notes. ‘In any case, the worst-case scenario is to index our members’ salaries to the parallel market rates.”
Labour expert Itai Bonda who is also Chairperson for the Association of Designated Agents of Zimbabwe said that it was important to give the new exchange rate regime some time to see how it will affect the labour. He highlighted that the transition from a fixed exchange rate regime to the auction system may instigate some demands for collective bargaining negotiations in order to align salaries to the average official rates. Bonda went further and said that all things being equal and assuming that the auction system will be the needed turnaround, the real value of salaries will improve in the medium term as prices will stabilise.
Labour is key in industry production and negations will likely to escalate if the local currency continues to lose value. Preservation of the purchasing power of wages and salary is important and the government is expected to continue with subsidies to cushion employees and other citizens from economic hardships. This however, will continue straining the fiscus and one hopes that price stability will be achieved.