Civil service pay crisis and its constitutional implications

via Civil service pay crisis and its constitutional implications – The Zimbabwe Independent January 22, 2016

In terms of the Constitution of Zimbabwe, the supreme law of the land, there exists a social contract between government and the people.

Tapiwa Mashakada

Every five years, citizens go to the polls to elect the President and Members of Parliament. The President is mandated to appoint a Cabinet to assist him to run the affairs of the state. Once elected, the executive has a duty and obligation to provide public services as well as the needs of its citizens. It’s a quid pro quo (something for something).

In a democracy, if an elected government fails to provide for the social and economic needs of its citizens, it can be removed through the ballot. In an undemocratic society, the government can be removed by popular uprising. In a despotic country, the government can be removed by a military coup. This is how serious the social contract between an elected government and its people is. Luckily, Zimbabwe is a constitutional democracy.

The Bill of Rights is the cornerstone of our democracy. It provides for red rights, blue rights and green rights. Red rights are also known as political or civil rights. Familiar in this genre is the right to freedom of speech, assembly and association. Most people end here. Then, there are blue rights, also known as economic rights such as the right to food, shelter, healthcare and employment. These are second generation rights. The third generation and last category of rights are called green rights. Typical in this genre are environmental rights. In Europe, activists have taken this right as far as forming “green” parties or green movements.

This opinion piece focuses on blue rights and their implication on the labour market.

As already indicated, blue rights are socio-economic rights. In regard to the labour, the right to a job is a human right.

Hence the adage: labour rights are human rights. If according to the Zimbabwean constitution, employment is a right it goes without saying that salaries are a right which should be paid as and when they are due. Failure to pay salaries as and when they are due clearly violates the constitutional rights of workers.

In this regard, government acted ultra vires to the constitution by failing to pay December 2015 salaries on time. Government violated the rights of workers — rights to a decent wage and a decent life. Workers were not able to celebrate Christmas with their families because they were deprived of their right to do so by the witholding of salaries by government. For some who are Christians their religious rights were violated as they could not travel to shrines or places of worship of their choice to celebrate the birth of Christ. Whichever approach one uses to statutory and constitutional interpretation, I argue that the failure by government to pay December salaries is in clear violation of the constitution. Human rights lawyers have a job cut out for them.

Then, there is the question of bonus. Is it or a right a privilege?

Since 1890, central government has never neglected paying bonuses. The payment of bonuses had become an entrenched practice; a tradition. In the past, some witty musicians would compose and release bonus songs. The late musician, Patrick Mukwamba’s Bonus track made an instant hit on the local music charts in the 1980s. Such was the popularity of bonuses that it became part of the civil servant’s end of year compensation. An income earned by past practice for such a long time cannot be taken away unilaterally as bonuses were a legitimate expectation.

I therefore beg to differ with those who hold a contrary view. It is my humble submission that at law, the payment of bonuses had become an acquired right given the historical trend. This position should continue and I challenge jurists to pursue this matter to its logical conclusion.

Legal and constitutional matters aside, we are worried about fiscal sustainability. Fiscal sustainability is a deriVative of what is called the fiscal stance. This refers to the state’s ability to collect fiscal revenues to meet its statutory obligations. The collapse of Gross Domestic Product (GDP) growth from the ZimAsset target of 7% to 2,7% is a cause for serious concern. The shrinking of GDP growth implies the shrinkage of potential revenues.

An analysis of government revenues will reveal that Paye and corporate tax have been declining over the past years. This is due to company closures and retrenchments. Effectively, government is now resting on one revenue pedestal which is Vat. Given the level of imports and consumption, government has had to rely on Vat for most of its financial expenditure. Because government is now in fiscal coldrom, it will have no choice but to increase Vat during 2016. Government is between a rock and a hard place. Raising Vat will provoke a public outcry. Failure to raise Vat will collapse the government as it will not be able to pay uniformed forces and civil servants. We can therefore see that the budget is nothing more than a recurrent expenditure tool. In November 2015, I warned that the budget was a pie in the sky and now chickens were coming home to roost.

Domestic revenues are part of a fiscal diamond comprised of official development assistance and foreign direct investment (FDI). In the absence of the other pinnacles of the fiscal diamond, it is crystal clear that government is not going any far with domestic revenue alone. That is the reason why Zimbabwe must open the doors for foreign direct investment. The country needs new money to boost money supply. Unlike the Zimbabwe dollar era where government could get seignorage revenues from printing money, Zimbabwe cannot create credit in a dollarised economy. The only game in town is FDI.

Zanu PF often asks the right questions but chooses the wrong answers. For example, on indigenisation, the solution is not 51%. The indigenisation policy can be likened to an elephant in the living room. The indigenisation policy is a red flag to investors. Recently, there were serious policy inconsistences between two government ministers over the so-called clarifications on indigenisation. The indigenisation policy has been rationalised by: introducing empowerment credits to promote compliance, empowerment levy on non-compliant companies, insistence on 51% in the resource-based sectors and fencing off reserved sectors from new entrants.

These changes will not work. The indigenisation policy is an outdated policy bordering on resource nationalism and an undertone of expropriation. What is required is a complete repeal of the law. No amount of tinkering will make the indigenisation policy acceptable to investors. Elsewhere, indigenisation attempts failed dismally. In South Africa, they changed the ill- fated black economic empowerment programme to the so-called broad based economic empowerment programme.

Instead of empowering the majority, only a few connected blacks benefitted. The likes of Cyril Ramaphosa and Tokyo Sexwale come to mind. The BEE programme has bred a corrupt public tender system which is now deeply rooted. The same applies to Namibia and Botswana. They abandoned theirs midstream. What we ought to realise is that investors now consider Africa as the last frontier. There are two types of investors. The first category is called General Partners (GPs) which refers to fund managers who invest on behalf of family funds, endowment funds and hedge funds among other private funds. The second category of investors are called long-term partners (LPs).
These are actually the owners of capital. In one of my investment promotion missions in London, I was priviledged to address both the GPs and LPs. Every investor spoke glowingly about the opportunities in Zimbabwe.

The human capital, the relative peace and stability and dollarisation. Almost all the investors said there was no way they could use borrowed funds to invest in a place where they are forced to cede 51% and lose controlling interest. They were talking business. And for the benefit of readers, London is probably the citadel of foreign capital. The response to indigenisation is a big NO.

China is different. The Chinese are after minerals, oil, gas and agricultural commodities. Paradoxically, Chinese companies are exempted from complying with the provisions of the indigenisation law. As for China itself, they abandoned their communist ideology. They adopted socialism with Chinese characteristics, a euphemism for market liberalism. The Chinese abandoned indigenisation and welcomed foreign investors with no conditions attached.

The result was a floodgate of investment from America, Europe and Taiwan. Taiwan businesses enjoy protection in China despite the One China Policy. Even the Asia-Pacific geo-politics has not changed China’s open door policy. The conflictual interests in the South China Sea has not affected foreign investors because their investments are safe. In China, they say that the colour of the cat is not important as long it catches the mice.

To show how serious China is with FDI, China signed a memorandum of understanding with Singapore in order for Singapore to build a new city ShenZheng based on the special economic zone concept. Shenzheng is on the southern part of China at the border with Hong Kong.

Singapore built this town and administered it for 30 years. The town was handed over to China very recently. Today China is the second largest economy in the world. Thanks to its “open – for -business” policy.

Zimbabwe is regressing by sticking to the discredited indigenisation policy.

As long as government buries its head in the sand and pretends that indigenisation does not scare investors, the economy will not recover in 2016.

In the absence of reforms, we should expect the deepening of the current fiscal and macro-economic crisis which is unabated. The jury is still out on the question why government cannot see this impending trajectory. Former finance minister Tendai Biti once said money does not grow on trees. This wisdom is apparently eluding the government.

Government has little room to manoeuvre. Apart from raising Vat, retrenchment of civil servants or cutting salaries is inevitable. 2016 is the year of tightening belts. Let us wait for legal battles to begin as the constitutionality of government failure to pay civil servants is brought to the foreground.

Mashakada is the MP for Hatfield, an economist and former minister of economic planning and investment promotion. These New Perspectives articles are co-ordinated by Lovemore Kadenge, president of the Zimbabwe Economics Society, E-mail: zes@gmail.com. Cell: +263 772 382 852.