More firms shut down, 400 lose jobs

via More firms shut down, 400 lose jobs – The Zimbabwe Independent February 5, 2016

MORE than 400 employees in the textiles and food sectors have lost their jobs as companies which employ them failed to open in 2016 while another 20 companies have applied to the Retrenchment Board to be exempted from paying retrenchment packages in January this year.

Kudzai Kuwaza/Hazel Ndebele

Textile companies which failed to open after the festive season include one of the country’s oldest manufacturers National Blankets Ltd in Harare. National Blankets Ltd, which was a leader in blanket manufacturing employed over 5 000 people during its peak.

Other companies which have shut down operations are Concorde Textiles, which had been operating since 1975, and Gred Clothing in Harare. In the food sector, NutriFoods in Harare failed to open for business after the Christmas holidays.

The Zimbabwe Congress of Trade Unions (ZCTU) acting secretary-general, Gideon Shoko said there could be more companies that failed to re-open this year and the labour union will only know the full picture after completing their ongoing exercise.

“The statistics are not pleasing because the numbers of companies, which are operating, continue to decrease, those which are open are unable to pay their workers and others have resorted to introducing short working hours,” Shoko said in an interview this week.

Company closures have become the order of the day as the country’s economy spirals downwards while the liquidity crunch continues to bite. Most companies have resorted to retrenchments in order to reduce costs.

“Most companies have let go of full-time employees and have settled for a limited number of contract workers,” said Shoko.

The cost of production in various sectors has over the years become more expensive, forcing most companies to resort to bringing in cheaper imports.

Sources in the construction sector said most companies have been operating on a small scale since January.

“Things are not looking good in our industry most companies are struggling to stay in business,” the source said.

“Pathfinder Driveways and Construction is open but operating on a very small scale and same applies to DG Construction which deals with civil engineering, plant and hire for earth moving equipment.”

The failure by companies to resume operations comes at a time companies are failing to pay the statutory retrenchment package as stipulated in the amended Labour Act. The law requires companies to pay retrenched employees two weeks salary for every year served.

A member of the board revealed that it is not only companies that are failing to pay the statutory retrenchment package but private schools as well.

“We have about 20 organisations who have applied to be exempted from paying retrenchment packages last month alone saying they do not have the money to do so,” the board member said.

“This includes private schools with one school applying to be exempted from paying packages to 23 teachers they intend to retrench.”
The major obstacle, however, for companies applying to retrench, the source revealed, is their inability to provide sufficient evidence to the Board that they are unable to pay the packages.

“We just do not accept at face value that a company cannot pay,” an insider said, adding “we have asked organisations for substantive evidence to show that they cannot pay workers their packages but despite promises to come back with it they never return.”

The company closures and increasing applications by employers to be exempted from paying retrenchment packages is the result of a debilitating liquidity crunch, low capacity utilisation of 34,3%, influx of cheap imports and power challenges.

This has had a devastating impact on government’s depleted coffers as the Zimbabwe Revenue Authority (Zimra) has constantly failed to meet revenue targets.

Zimra chairperson Willia Bonyongwe revealed this week that individual tax which includes Pay As You Earn (Paye) missed the annual collections by 7% and was 15% below previous year collections at US$777,83 million.

The revenue collector said the Paye debt as at the end of 2015 was US$591 million compared to US$393 million in 2014.
This partly explains why government failed to pay salaries on time resulting in civil servants going for the Christmas holidays without their December salaries for the first time since independence in 1980. The government is also struggling to raise money to pay civil servants last years’ bonuses as a result.

Economist John Robertson said the failure by companies to continue operations or pay retrenchment packages is a result of the liquidity squeeze in the market.

“Most companies have used up their financial reserves and the severe liquidity shortage which has worsened since the beginning of the year means they cannot borrow money from banks which are now more cautious when lending money,” Robertson said.

He said the failure to finalise the amendments of the Indigenisation law has scuttled any hopes of significant investment in the country.

Robertson said with the looming increase in power tariffs, more companies will close in 2016.