The government recently offered civil servants a 97% salary increment. Essentially this would have seen the lowest paid civil servant now getting RTGS$2033 up from RTGS$1023. That RTGS$2033 is just about a paltry US$92. In light of that, civil servants have decided to reject the offer. This decision was premised on the amount not being anywhere near what the civil servants initially demanded. The Apex Council (civil servants’ core representative body) indicated that a welcome offer would be one matching civil servant salaries from October 2018.
The Apex Council’s Demands
Last Friday the Apex Council held a meeting with government officials regarding the civil servant’s salary increment issue. No consensus could be reached because the Apex Council is demanding that the lowest paid civil servant must get an equivalent amount to US$475. Like I said earlier the offer of a US$92 equivalent amount from the government is way off the mark. The Apex Council has indicated that since last year that has been their position to the government. In simple terms, it is: apply the interbank rate on civil servants’ salaries from October last year if any restoration of value is to be achieved. So what is the way forward? They have declared civil servants’ incapacity to discharge their duties. Roughly the lowest paid civil servant is getting around US$40 or so equivalent – surely how can anyone sustainably live on such an amount? The Apex Council are meeting and updating its members this week to chart a way forward.
A Catch 22 Situation For Treasury
I have often said the government is stuck in a Catch 22 situation. A Catch 22 situation is a scenario where there is virtually no great solution possible because of the manner in which factors regarding a solution are intricately related. We have a government whose wage bill is already unsustainably high. An increase in civil servants salaries will exponentially spike that wage bill. Government coffers are not endowed enough to cater for the current wage bill as it is. If you recall sometime early last year the Apex Council called for salary increment to RTGS$1700 for the lowest paid. Sadly, the government has only budgeted on RTGS$3.9 million for the public sector. Had that salary increment been approved the wage bill for the public sector would have shot up to RTGS$12.2 billion. Evidently the government was in no position to be able to sustain that. That is the same situation the government finds itself in now.
The Murky Revenue Situation
The government is having a hard time effectively collecting revenue. That is why you find ludicrous revenue collection initiatives being enacted in a desperate bid to collect revenue. The irony is that not all of the collected revenue is channelled to where it matters the most anyways. The other hurdle government contends with is the issue of informal trading. The Zimbabwean economy has morphed into a very informal one. Let us look at some interesting statistics. At least 70% of ZIMRA’s registered taxpayers are small and medium enterprises (SMEs). Due to the ailing economy, most of these are struggling to realize significant revenues. This, in turn, means that ZIMRA is not getting as much revenue from them due to that.
On the other hand, most of the economic activities nowadays are happening in the informal sector. This informal sector is employing at least 60% of the nation’s workforce. The stark reality on the ground is that the lion’ share of the proceeds from these economic activities is not in the formal monetary and fiscal systems. This can be due to the absence of formal business registration, tax evasion plus many other possible reasons. This means a huge chunk of money that should otherwise be realized by ZIMRA through taxation is eluding them.
So what is the conclusion of all this then? For starters, civil servants deserve to be paid enough to live sustainable lives. Most civil servants literally feel they are being treated like servants (not workers). On the other hand, the government has a seriously compromised balance sheet which makes it economically suicidal for them to approve the salary increment civil servants are demanding. Looking at it from another angle, that compromised balance sheet is self-made due to corruption and inconsistent policies by the government. Regardless, it is incumbent on the government to figure out ways to address the concerns being raised by civil servants. The ripple effects of civil servants being disgruntled and declaring incapacitation will linger for a long time to come.