The debacle between Government and Delta Corporation over the latter’s announcement that it intended to price its products in foreign currency, brings to the fore the dire need for a social contract between authorities and the private sector.
A social contract is loosely defined as an agreement among the members of a society, including government, to cooperate for the benefit of society.
Delta dropped a bombshell on Wednesday last week, indicating it intended to start selling its products in foreign currency to enable it to pay foreign suppliers and sweat its assets to ensure availability of products.
The company needs foreign currency (US$2 million monthly) to import raw materials such as concentrates from Swaziland and granules used to make plastic bottles (PET).
Granules are imported from South Africa, but for the beer section, most of the raw materials are locally sourced.
But after engaging Government, represented by Vice President Constantino Chiwenga, Finance and Economic Development Minister Professor Mthuli Ncube and Reserve Bank of Zimbabwe (RBZ) Governor Dr John Mangudya, on Thursday Delta head honchos agreed to rescind its decision.
Dr Mangudya and Delta CEO Mr Pearson Gowero released a joint statement indicating that the parties had “agreed that Delta withdraws the notice to sell its products exclusively in hard currency, in the spirit of the multi-currency framework”.
Analysts say the pact entered into by Government and Delta, showed that negotiations are key in resolving economic and social disputes.
Zimbabwe National Chamber of Commerce (ZNCC), chief executive officer Mr Takunda Mugaga, told The Sunday Mail Business last Friday that a social contract was critical to avoid such disturbing developments.
“I think if there is one thing we can’t underestimate in this country, it is the need for a social contract. We have been talking about the social contract – involving Government, business and labour — for a long time now,” said Mr Mugaga.
“It must not be activated after an incident like the one we had with Delta. We want to see a case where the stance by Delta should rather be solved within the social partners before it went public because it sends wrong signals when people now see signatures of companies and Government, agreeing on prices or such things.
“It would appear as if there is duress, which might appear as though the country does not have economic freedom.”
Economic Freedom is an annual index and ranking created in 1995 by The Heritage Foundation and The Wall Street Journal to measure the degree of economic freedom in the world’s nations.
Economic analyst Mr Persistence Gwanyanya, also said there is “always need for dialogue” between Government and the private sector for “commonality of purpose”.
“There is need for continuous engagement and revision of positions between Government and the private sector as economic conditions keep on changing,” said Mr Gwanyanya.
“While it is quite comforting that in the last half of 2018, the President (Emmerson Mnangagwa) granted a meeting to CZI (Confederation of Zimbabwe Industries) and other captains of industry to discuss contentious economic issues including the currency question, it’s disheartening that the same captains of industry could not proffer tangible solutions to our challenges . . .
“It’s common cause that these captains overwhelmingly supported the maintenance of the current USD/RTGS/bond note exchange rate peg, which is now largely blamed for the current economic distortions, which are driving the economy towards re-dollarisation.”
He added that there is “serious need” for the private sector to engage the RBZ on the sustainable currency solution, given the currency instability.
Going forward, Mr Mugaga called on Government, private sector and labour to engage and find solutions to issues before they spill into the public domain.
“The social contract should negotiate issues before going to the public. Social contract partners should take a position prior to a decision by businesses.
“But the problem with companies such as Delta, I am sorry to say this, is that when we negotiate with Government, you don’t see them involved; they want to go on their own.
“So at the end of the day, ZNCC, CZI, Bankers Association (of Zimbabwe) end up being aloof when companies face problems,” said Mr Mugaga.
He said Delta should have asked ZNCC to negotiate its issue with Government, before rushing to make a public announcement.
ZNCC is a non-profit, membership-based organisation that provides services designed to support members in business development.