adminpurchasing power of the US dollar.
The cost of living for an average urban family of six, as measured by the Consumer Price Index, rose 3,4 percent year on year. But income levels remained stagnant, with companies failing to sustain current wage bills.
Most firms pegged salaries on switching from the local currency to multi-currency. The currency switch dropped inflation to negative levels of -7,7 percent in December 2009. But eight months down the line the rate rose to 4,1 percent.
This means the purchasing power of the US dollar in Zimbabwe was reduced by the same rate, further diminishing by 3,5 percent between August 2010 and August 2011.
To remain with the same purchasing power as in December 2009, one should have been able to receive increased income at more or less the same magnitude.
Consumer Council of Zimbabwe’s consumer basket stood at US$504 in August 2011, compared with US$487 during the comparable period last year, representing a US$17 increase.
Failure by companies to pay living wages is attributed to liquidity challenges and high cost of finance, which have affected efforts to increase production.
Since the introduction of the multiple-currency system in 2009, companies have been struggling to recapitalise and enhance performance with capacity increasing to between 50 and 60 percent from about 20 percent in 2009.
Analyst Mr John Chikura said retailers still “thought” in the old currency regime, assuming that prices should go up every three months and when civil servants get a pay raise.
“Beside the behaviour by retailers, companies are no longer enjoying a good relationship with the banks. So, for this situation to improve, there is need for recapitalisation (by way of access to affordable finance),’’ said Mr Chikura.
Economic challenges faced by individuals and corporates alike include the high cost of power, healthcare, education, transport, food and fuel, among others.
Consumers of electricity have been forced to fork out more on power, either in terms of settling Zimdollar arrears or seeking alternatives to beat load-shedding.
At corporate level, the cost of power increases almost 500 percent if firms decide to use diesel generators or 100 percent if they need dedicated supply from Zesa.
Healthcare, education, transport and food costs have moved in tandem with fundamentals of demand and supply, but in some instances due to speculative tendencies.
Exchange rate movements, especially between the South African rand and the US dollar, have had their effect as well. Zimbabwe imports the bulk of its basic goods from South Africa, which means that whenever the rand appreciates the cost of importing rises in US dollar terms.
But the bottom line remains the fact that companies are struggling to secure affordable long-term funding to recapitalise, raise efficiency and productivity.
If that happened companies would be able to sell more locally and internationally to realise more income, which would in turn enhance their capacity to improve their workers’ pay packets.
Human resources experts argue that it is time companies switched to performance-based remuneration to keep high the workers’ morale in difficult times.
It will take a long time for the macro-economic conditions to improve to a level where all companies would
Online Reporter