CZI opts for the ‘bitter pill’

Busisa Moyo

Busisa Moyo

Business Reporter
THE government and the business community should urgently come up with a bold once off mechanism to reduce production costs as part of measures to stimulate economic growth and enhance domestic product competitiveness, Confederation of the Zimbabwe Industries (CZI) president Busisa Moyo has said.

Given suppressed economic growth due to high costs of production and difficulties in accessing long term borrowing for recapitalisation, CZI says the country has no option but to swallow a bitter pill of cutting down costs if it is to survive.

The proposal is in line with the internal devaluation option, which is premised on restoration of international competitiveness of a country through lowering production costs without reducing the value of the exchange rate.

“The environment and outlook is challenging. We need a deep entrepreneurial spirit and innovation to overcome what business is facing. We’ve to work with the government candidly, openly and with urgency, otherwise the roof will come down economically,” Moyo said.

“We must avoid distractions and have a clear understanding of what hurts business/enterprise and what heals business.”

Economists have warned the projected 2,7 percent growth rate for 2016 seems unlikely given the biting effect of drought, which has crippled the agriculture sector while declining international market commodity prices have worsened the plight for export drivers mainly in the extractive industries.

The weakening of the South African rand, Chinese yuan and other currencies in the regional trading zone in relation to the firming US dollar, has compounded the situation.

The CZI boss, who is also chief executive officer for United Refineries Limited, lamented lack of willingness to change saying economic turnaround would not happen on its own. He challenged both the government and industry to be pro-active.

He warned that unless urgent measures were taken by both parties, the country would continue to lose skilled labour to other countries, which has a crippling effect on economic performance.

“This can be stopped by reducing wages across the board instead of waiting for the economy to collapse.

Both the government and business are saddled with high labour costs, which they can’t afford. The will to do the right thing and take necessary pain is still lacking.

“The country must set a single and reasonable minimum wage and connect anything above this wage to productivity. It’s the pain the country must take now to avoid failure to honour debt obligations,” Moyo explained.

“Also other costs like levies, rentals, judicial management fees, power costs, must all come down through a once off mechanism that allows a review of previously signed agreements and contracts. This is why CZI is calling for internal devaluation. Right now we’re tinkering on the periphery of economic issues and behaving in ways that are disrupting an already ailing economy.”

He noted that while some companies had managed to survive the prevailing economic tide, several of them went into judicial management and embarked on downsizing exercises. Moyo attributed the trend to the hyperinflationary legacy prior to dollarisation in 2009, high costs of borrowing of up 42 percent soon after dollarisation, antiquated machinery and international competition.

He observed, for example that companies that used to export Van Heusen shirts from Bulawayo could no longer compete with China given current high costs of labour.

While the US$ environment has brought advantages such as longer planning horizon and stability in terms of financial planning, Moyo said the regime has also brought a challenge of a high cost base for businesses who are unwilling to revise costs downwards to achieve competitiveness.

CZI boasts of 300 direct company membership and 28 industrial associations, which include other companies within respective groupings.

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  • Freedom Fighter

    Wage reduction usually fo lower level employees. Management salaries are never touched. These are just mechanisms to cheap shopfloor workers.

  • koka

    Busisa demonstrate your leadership qualities by cutting your own pay by half then challenge all your colleagues, especial at executive level to follow suit. why are companies not mechanizing? surely if labor is too expensive the other alternative where possible is to substitute labor with machinery.

    • ISRAEL ISRAEL

      That is the problem with our so called learned CEOs. Dwelling on trivial issues leaving glaring inefficiences prevailing in all Zimbabwean industries save may be for DELTA. The rest are so miserably in efficient to the extent of defying logic eg the amount of waste produced is on average double the finished goods and add an overpaid bunch of executives and their untouchable perks and allowances the result is a disaster and demise of industry but sadly you choose only to focus on shop floor workers wages. Very sad indeed.

    • Busisa Moyo

      I took a pay cut of 30% last year. Busisa.

      • ByoIndustryKilledNot Dead

        I personally believe that Busisa Moyo Has been given the right signals and saying the correct things in terms of the way forward. The problem is implementation. If you look at how Busisa Has turned around UR then you can appreciate that we merely lack good leadership in the country! Busisa for President!

        • Busisa Moyo

          Thank you for the compliment. I have no interest in politics. I am a pastor and businessman. That’s how I chosen to serve God and my country.

      • koka

        I didn’t know. If you have done so uyindoda emadodeni. I wish you all the like.

  • Lamech

    Good people. I quote the statement in the article “This can be stopped by reducing wages ACROSS THE BOARD. At no point did Mr Moyo say the wage reduction should be for lower level employees alone. He says everyone must share the burden and has responded by leading from the front and taking a pay cut himself. It’s no secret that wages are, for most companies /institutions the largest single recurring cost. As such, the best place to start would be right there. Even our government realises this and is attempting to reduce its wage bill as this is stopping it from performing its functions well. What good would it be to earn a high wage for a short time then the company closes due to unsustainable costs? As Zimbabweans we need to learn to own our companies/institutions. When the company dies well, then once again, ALL must share in its prosperity. It must not be a case of “us vs them” because we are one and the death of industry affects us all. The key is for the burden to be shared by ALL, for the good of all.