Economic Focus: 97 percent? It Can’t!

Source: Economic Focus: 97 percent? It Can’t! – Sunday News Sep 11, 2016

Gabriel Masvora
WHEN you are being introduced to mathematics at primary level, there is a certain level where you are told that some of the problems are not solvable and the best answer which is used is “IT CAN’T”.

Such examples included trying to subtract two from one. At that level what it means is that you cannot take away two from one, the reason being that one does not have enough units to subtract two from hence the answer is it can’t. In short, it is impossible.

Of course as you progress you are introduced to such terms as negative answers to such problems.

However, in real life I think the primary school answer is the best. You cannot subtract more where there is less because instead there is nothing to subtract from. That IT CAN’T answer is exactly the position where the Government has drifted towards in terms of meeting salary obligations for their workers.

Finance Minister Patrick Chinamasa, in his mid-term fiscal policy review statement on Thursday said from January to June employment costs are now taking 97 percent of total revenue by the Government. This is not a laughing matter anymore.

At 97 percent, what it means is that almost all what is being collected by the Government is going towards meeting salaries.

No Government, company or even an individual can continue living properly under such conditions.

Imagine even at household level when your total income for the month is $100. From that $100, $97 goes towards paying your maid and garden hand. You are basically left with $3 to buy food, pay your kids’ school fees, pay for prepaid electricity for the month, water and bus fare, among others. We are talking here of basics before even looking at bigger projects like depositing for a television set or a beast in the rural areas. Even someone who has never heard of economics in his life will definitely argue that such a situation is ridiculous and impossible.

But this is exactly what the Government is going through now.  This is seriously a very big problem. Very big that it is obvious that the Government can simply not meet other demands of the nation, if all the money is going towards paying workers.

The private sector, which is the cash cow for the Government through taxes is also struggling. Some companies are even retrenching or closing meaning the Government is losing both on corporate tax and Pay As You Earn. Smuggling is also now rampant at the borders and very little is being realised from duties associated with movement of goods across borders.

It has become common if you board buses coming from South Africa that the conductor collects around R50 from every passenger when you are approaching the border post. The next thing you are told to write on the declaration forms that the goods you are carrying are only worth a few dollars when in reality they are worth thousands of dollars. This is another way the Government is losing potential revenue.

In fact, on the ground the situation is pointing to further dwindling of revenue. While the revenue is dwindling, the civil servants are there every month and still expect to be paid their salaries whether the Government has raised money or not.

If the situation continues like this we are in the next few months heading towards a scenario where all the money the Government will collect will go towards meeting salaries After all they are only three percent shy from making that history.

That is not the only possible scenario. The Government might be heading for a worst case scenario where even the collections they will make will not be able to meet the salaries. This will mean that maybe pay dates will be changed to “when we have raised the money” or the worst in some cases no salaries would be paid at all. Is this what we want as a country?

One of the worst news any worker needs to be told is the issue of retrenchment. Under these challenging economic conditions, it is very disheartening to lose a job for life is tough out there. Everyone is going into some sort of vending and this cannot sustain the livelihoods of every worker who will lose his/her job.

It is not good news but under the conditions which the Government is operating, you tend to feel for them.

Minister Chinamasa announced that 25 000 civil servants will lose their jobs. This is very sad and I am sure most of these workers have started to look at themselves and wonder if they will be among those who will be affected.

In addition there will be no bonus for civil servants for the next two years. The bonus issue is not a big matter though as many workers in the private sector stopped getting that 13th cheque many years ago.

However, at the same time you tend to feel for the Government. What are the best possible solutions? Will retrenchments solve the problems? If they do not retrench where will they raise the money to pay civil servants salaries every month when at the moment almost all what they are raising goes to meet salaries. The Government cannot just be a point of collecting money and meeting workers’ salaries. There are many other functions which Government is expected to do. Right now there is drought and an estimated four million people need food aid until the next harvesting season which is around April next year.

Most hospitals need funding. Roads need to be rehabilitated. All these need money and surely that money cannot come from the three percent change which the Government is remaining with after paying salaries. There is a need for bolder solutions, bold thinking and Minister Chinamasa and his team of technocrats must quickly come up with the solution. For this 97 percent to salary situation is definitely unsustainable and indeed IT CAN’T.