By Byron Mutingwende and Munyaradzi Dhure
The Zimbabwe Congress of Trade Unions (ZCTU) has called for nationwide demonstrations on Thursday 11 October 2018 against the recently pronounced fiscal and monetary policy measures.
Peter Mutasa, the ZCTU President, while addressing the press on the organised workers’ national action plan against the fiscal and monetary policy measures, alluded to a number of factors that had led to their decision
The measures include the introduction of separate FCA accounts for Nostro and RTGS funds. There is a proposal for purchase of fuel in Zimbabwe by foreign truckers in foreign currency. There is a policy allowing individuals to sell their immovable properties to buyers using offshore funds amid calls for the review of the Intermediated Money Transfer Tax from 5 cents per transaction to 2 cents per dollar transacted.
“The Zimbabwe Congress of Trade Unions (ZCTU) is deeply disappointed by the measures announced by both fiscal and monetary authorities that will worsen the plight of workers and Zimbabweans in general.
“The new measures, instead of solving the economic crisis that the country faces, increases taxation and fail to find solutions to the cash crisis and high price of goods and services amongst a host of issues affecting workers and the general public,” Mutasa said.
The introduction of a two percent tax on every dollar on all electronic transactions has appeared to have a direct effect of overburdening the already overtaxed and underpaid workers.
The move is seen to create a fertile ground for a multiple tier pricing system that spurs the cost of living as retailers and service providers would pass on the costs to consumers.
“We are chiefly frustrated with the policy directive of separating the Foreign Currency Account (FCA) from the Real Time Gross Settlement (RTGS) accounts which amounts to treachery by the monetary authorities who assured account holders that the US dollar was equal to the bond note.
“Workers and individuals who had earned their salaries in United States Dollars are bound to be prejudiced by the distinction of accounts. There is also a huge possibility of salary distortions, erosion of workers’ contributions that were made in US dollars from 2009 and mortgages hovering over. This has created serious uncertainty amongst workers reminiscent of the 2008 savings plunder whereby investments and pensions were eroded.
“We once reminded the monetary authorities of our reservations on the unilateral introduction of bond notes. Labour had proposed adoption of the Rand which could be ‘realistically’ rated against US dollar and could restore measurable value but the authorities refused,” Mutasa said.
He emphasised that the centre of the current economic crisis are fiscal imbalances and how they have been funded. This challenge has had destabilising implications not only to the financial sector but to the rest of the economy. The financing of the deficit was mainly through domestic borrowing with the use of instruments such as Treasury bills, overdraft with the Central Bank, cash advances from Central Bank, arrears and loans from the private sector.
The ZCTU said such financing mechanisms is crowding out the private sector, hence constraining production. This also increased money supply in the economy translating into exchange rate misalignment and inflationary pressures now at 4.9%, as at August 2018.
“The Fiscal Policy Statement shows how fiscal indiscipline since the end of the Government of National Unity (GNU) in 2013 created domestic debt, from as low as US$275.8 million in 2012 to current levels of US$9.5 billion, with an external debt of US$7.4 billion external debt, bringing the total public debt to US$16.9 billion.
By separating FCA Accounts for Nostro and RTGS funds, the ZCTU said he government had tacitly accepted the reality of different currencies in operation in the economy, one where the physical multi-currencies apply, and the other relating to electronic transfers not backed by any physical cash.
The workers say the move creates an elite class made up of international organisations,diaspora remittances, free funds, export retention proceeds and loan proceeds (foreign currency earners) who will use what Gresham’s Law refers to as ‘good money’ (Nostro FCA balances) while the rest of the public is relegated to the use of ‘bad money.
However, with the huge shortage of multi-currencies, electronic and RTGS transfers which are not backed by any physical cash have a much lower value as reflected by the premium on physical cash on the thriving parallel market of foreign currency.
Those currencies deemed RTGS balances cannot be used for external payments and will continue to lose value due to inflation. In essence therefore, this categorisation effectively reinforces the inherited distorted dual and enclave economic structure.
“It would appear lessons from the hyperinflation era have not been learnt, where as a result of the erosion, and effective destruction of the Zimbabwe dollar, ordinary citizens and the working people lost value through bank deposits, insurance premiums and pension contributions. This prejudice, which led to the establishment of the (Retired) Justice Smith Commission of Inquiry into the Conversion of Insurance and Pension Values from Zimbabwe Dollars to United States Dollars, is playing out again, this time under the multi-currency system,” Mutasa said.
The ZCTU noted with concern that the collection of the Intermediated Money Transfer Tax to all electronic financial transactions is regressive in that it negates the very essence of such platforms that were established to promote financial inclusion since taxing the formerly financially excluded poor people, especially in rural and urban communities is highly regressive and retrogressive.
Moreover, the move comes at a time the Central Bank has been promoting the use of plastic money, electronic and mobile money payment systems by the Zimbabwean public.
“Clearly, therefore, this regressive tax is at odds with the vision of the Monetary Authorities to create a cash-lite society by 2020. It should not be lost to Zimbabweans that we have been here before, as Government railroaded the populace into ESAP in 1991. We need to recall the lessons learnt, if any, so that we are the wiser going forward.
“If therefore national ownership engendered through stakeholder participation is a critical success factor and key lesson from past experience, then what is unfolding in Zimbabwe under the new dispensation is most worrying. How do we expect to succeed when programmes are being rolled out without stakeholder participation? How Cabinet approve a ‘Macro-economic and Fiscal Stabilisation Programme’ without stakeholder participation and ownership?”
The ZCTU is urging the Government to institute comprehensive stakeholder consultations as the basis for moving forward and addressing the myriad of challenges bedevilling the economy, and negotiate a Social Contract as the basis for recovery and inclusive, broad-based growth and human development. An institutional framework to promote such stakeholder consultations, the Tripartite Negotiating Forum (TNF) is already in place.
Meanwhile, the Amalgamated Rural Teachers’ Union of Zimbabwe (ARTUZ) has endorsed the ZCTU’s call for demonstrations on October 11.
“The Amalgamated Rural Teachers’ Union of Zimbabwe, ARTUZ endorses the demonstration called for by the Zimbabwe Congress of Trade Unions, ZCTU. The 11 October protest is a rare opportunity for the working class to demonstrate Unity of purpose as we fight against neo-liberalism packaged in austerity measures and devaluation of our virtual Zimbabwe dollar.
“ARTUZ calls upon its members from across the country to join the protest. We further invite all members of the working class, vendors and other ordinary citizens to seize the opportunity and register our discontent with the authorities. If we don’t organise now, we are certainly going to perish,” ARTUZ said in a statement.