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Government last week announced a raft of measures aimed at reducing employment costs in order to redirect revenue towards capital expenditure. Presenting the Mid-Year Fiscal Policy Review statement in the National Assembly last Thursday Finance and Economic Development Minister Patrick Chinamasa said fiscal space remains tight as a result of revenues that consistently underperform while expenditures continue to outstrip targets.
Minister Chinamasa said in order to address the anomaly, government had resolved to take bold measures to reverse the unsustainable consumptive position and these measures include civil service restructuring which is expected to cut employment numbers by 25 000, a cut on salaries and allowances and foregoing of bonuses for two years beginning this year.
Government will also rationalise the number of Embassies and Consulates, review class travel arrangements of all officials including Ministers, Parliamentarians, independent commissions and State enterprises officials. The measures are expected to reduce employment costs to around 60 percent by 2019 compared to the present 97 percent.
Cde Chinamasa said the Wage Bill Rationalisation Measures that have been implemented since the beginning of the year are already yielding monthly savings of around $6,5 million. He said additional measures already approved by Government which came into effect in July were expected to boost monthly savings by $6,9 million and Government expected annual savings of about $118 million.
The Minister said under the new system, government would issue one condition of service vehicle to Deputy Ministers, Permanent Secretaries and those of equivalent grades while directors and equivalent grades will now be offered loans to buy own vehicles. The review of condition of service vehicles, Minister Chinamasa said, will also apply to independent Commissions and authorities.
Minister Chinamasa said government had also suspended all Government bailouts of Parastatals that are not supported by approved specific and measurable recovery plans that comply fully with Remuneration Framework and Public Corporate Governance Law. Government will also reduce the number of embassies and consulates as well as allowances and other benefits for diplomatic staff.
The measures announced by Minister Chinamasa are very painful but that is the only way to address the challenges facing government at the moment. These measures, in our view, were long overdue given the fact that employment costs are gobbling almost 100 percent of government revenue. This is an unsustainable consumption pattern that should be changed urgently.
A company can only be viable if its monthly staff costs are 30 percent or below of revenue and that is what the government should work towards. Minister Chinamasa said in the 2017 National Budget he will propose measures targeting to reduce employment costs to $232 million per month by June 2017 and $219 million by December 2017.
Captains of industry and economic analysts have called for speedy implementation of the proposed measures. It is our hope that Government will engage the civil servants so that they appreciate why it is necessary to take such austerity measures. It is not in dispute that Government is already failing to mobilise adequate resources to pay salaries hence it is now staggering payments dates.
It is a fact that unless measures are taken now to reduce employment costs, government might one day fail to pay salaries. We want to commend government for resolving to take bold measures to reduce employment costs but we are of the view that the executive could do more.
Online Reporter