Zimbabwe govt in bonus strain

By Shame Makoshori

HARARE – Civil service bonuses, which created a storm when President Robert Mugabe last year rejected moves by Finance Minister Patrick Chinamasa to scrap them, could this year throw government into a financial quandary.

Public Service, Labour and Social Welfare Minister, Prisca Mupfumira has indicated that civil servants would receive their bonuses this year, with members of the military expected to get their 13th cheques this month. Other civil servants would receive their bonuses between December and January, Mupfumira said.

But Chinamasa is said by sources to have indicated last week that the cash-strapped government did not have the finalised wherewithal to fund the bonuses, raising the possibility of government failing to honour its commitment.

By last week, pensioners had not yet received their pensions from Treasury due to cash challenges, highlighting a worsening liquidity crunch within government. Government requires at least US$140 million to fund bonuses for the 553 000-strong civil service, according to government officials.

This amounts to four percent of the current budget, which was revised downwards by Chinamasa in his mid-term fiscal policy review statement. Legislators and Ministers who attended a pre-budget conference for 2016 in Victoria Falls last week said the issue of civil service bonuses was among the contentious issues they debated, with officials asking Chinamasa to come clear on the matter.

“Chinamasa was asked about the bonus issue and he said he had been asked to pay but he had no money,” a government source told the Financial Gazette. The source spoke as a United Nations official told reporters in Harare last week that government finances were in a dire situation, having already incurred a US$400 million deficit so far.

“As we head into the end of the year, we are already in the red and government has not paid bonuses yet,” said Sam Muradzikwa, chief of social policy and research at the United Nations Children’s Fund.

“There will be a cumulative US$460 million deficit from the original US$4 billion budget. Government can’t afford to pay these bonuses and not paying the bonuses will save about US$140 million,” said Muradzikwa, who spoke at a meeting to discuss the performance of the 2015 National Budget.

In her interview with State media two weeks ago, Mupfumira said: “Civil servants have to get their bonuses, but I am not in a position to give a date yet. We will discuss with Treasury next week and announce the government position after the discussions”.

She also told a State-run weekly that soldiers would get their bonuses this week and other civil servants would get theirs in the following months. Chinamasa, who came under fire from the President last year after indicating that Treasury was overstretched and had no resources to use beyond salaries, would have to scrounge for money to fulfil the promise and avoid courting the ire of President Mugabe.

The Finance Minister, who is spearheading Zimbabwe’s re-engagement with global lenders, has been under tremendous pressure, especially from the International Monetary Fund (IMF), which currently has a Staff Monitored Programme (SMP) with Zimbabwe. The programme is an informal agreement between Harare and the Bretton Woods institution to monitor Zimbabwe’s economic reforms.

As part of the SMP, Chinamasa is expected to demonstrate government’s commitment to eliminate fiscal deficits to reaffirm Zimbabwe’s intention to further raise its capacity to repay debts before new funding is unlocked.

Among his priorities has been mobilising resources to ensure that revenue does not only fund a bloated civil service, but also funds programmes that stimulate economic growth without cutting the size of the civil service. But even as he prepares to unveil his fiscal plan for 2016, he has been walking a tight rope, with the Zimbabwe Revenue Authority (ZIMRA) indicating that revenues continue to decline.

In the third quarter to September 30, 2015, ZIMRA said revenue collections totalled US$878 million, against a target of US$964 million after company closures and job losses affected most tax heads. This week, economists warned of serious consequences should Chinamasa pay bonuses. They said while bonuses would boost morale among government workers, State operations would be crippled.

“It is both a social and political decision,” said economic commentator, Luxon Zembe.

“It will boost morale within the civil service but it will also constrain the budget. The minister will have to mop up resources from critical productive areas such as infrastructure development, which will be compromised. Bonus is a luxury. When things are really tough that is something you can put aside and focus on salaries. That is why the private sector is not paying bonuses,” he said.

Prosper Chitambara, an economist with the Labour and Economic Development Research Institute of Zimbabwe, said government did not have the capacity to fund bonuses.
“The resource envelope is limited,” said Chitambara.

He added: “Government faces serious budget constraints. We should look at tax reforms, such as how best do we tax the informal sector because as you know, more of our economy is in the informal sector. We could also tax the rich, although we must be careful that this may cause capital flight. And we can have corrective taxes whereby we tax alcohol consumption, smoking and gambling. This does not grow the economy, but leads to a redistribution of resources,” he said.

In Cabinet, some ministers are against scrapping bonuses because they feel State workers were earning meagre salaries. Others have argued that the bonus burden was too much for a struggling Treasury.

But union leaders have implored Mupfumira to proceed with bonus payments.

“We have not received any communication from the government regarding this year’s bonuses but we will continue to hope that government will pay all its workers their dues at the end of the year as promised by the President,” said Sifiso Ndlovu, chief executive officer at the Zimbabwe Teachers Union. Financial Gazette