Minister Prisca Mupfumira

Prosper Ndlovu Business Editor
THE crafting of the new labour laws, a critical step in enhancing increased investment and industrial production, is on course with the draft bill expected to be out by June this year, a Cabinet Minister has said.

Cabinet approved proposed labour law reforms in December 2014, paving way for the introduction of productivity linked wages.

Industrialists and economic experts demand that a review of the country’s labour laws should take into account economic challenges that continue to impinge on productivity.

Public Service, Labour and Social Welfare Minister Prisca Mupfumira said last Thursday that significant progress has been made in finalising the new labour legislation.

“You’re aware that the proposed reforms were tabled before Cabinet and the principles were approved. Now the document is before the Attorney General who is working on the draft bill.

“We expect it to be out before end of June and after that we’ll do consultations.”

A recent cost-driver analysis study by Zimbabwe Economic Policy Analysis and Research Unit (Zeparu) highlighted the urgent need to reform the country’s labour laws.

It identifies labour, along with capital, as a basic factor of production with a cross-cutting influence in all the other identified cost-drivers, such as finance.

In some sectors, such as manufacturing and banking, labour represents as much as 33 to 55 percent of total input costs, says the study.

“It’s therefore critical to ensure that wage levels are aligned with overall growth and productivity in the economy,” it said.

The crafting of the new labour laws is envisaged to introduce production efficiencies in the economy and measures that will usher increased productivity at the firm level.

Among the reforms is the proposal that collective bargaining be done at company level so that wages and salaries agreed on are realistic and take into account productivity levels at company level.

The government has already taken a decision to reduce parastatals and local authorities’ wage bills.

The proposed labour laws reforms come amid increasing concern that wages and salaries are too high given the state of the economy.

The economy is struggling to grow due to a myriad of challenges and as such businesses have been clamouring to reduce wages.

However, the proposed changes have put the government and employers at loggerheads with workers’ unions that are resisting moves to adopt productivity linked wages.

Unions’ argument is that Zimbabwe was not yet ready for productivity-linked wages and insist on maintaining the Poverty Datum Line (PDL)-linked salaries. The PDL is estimated to be about $500.

According to the study, Zimbabwe’s labour costs are higher in relation to Zambia, Botswana, and Mozambique but lower compared to South Africa.

At an average of $246.50 per month in Zimbabwe, the minimum wage in Botswana, Mozambique and Zambia stands roughly between 42 percent and 53 percent of the level in Zimbabwe.

Zimbabwean minimum wage for an entry level position is roughly 38 percent of the South African levels, where the comparable minimum is $646.40.

The study buttresses replacement of collective bargaining from NEC to company level.

Such a change, it says, will take the particular circumstances of the company (as opposed to that of a broad industrial sector) into consideration and the salary increases agreed at this level are bound to be realistic, sustainable and more in line with productivity. It also recommends modification of legislation to explicitly regulate redundancy benefits in line with or below regional levels.

Such a stance, it said, would reduce costs to the employer and position the business for improved profitability and sustainability, which in turn will allow increased employment.

Other proposals include introduction of a rapid resolution scheme to allow companies to retrench at a reasonable cost.

Revision of wage-setting mechanisms of central and local government, and state owned enterprises has also been suggested.