Zimbabwe’s formal sector is expected to shed over 50,000 jobs by year end amid a contracting economy as companies take a knock from the effects of the Covid-19 pandemic, Business Times can report.
The projected job losses come after various local firms have been trimming workers to contain costs in the wake of suppressed revenue inflows.
Prior to the lockdown, the economy was grappling with foreign currency shortages, power outages and El Nino induced drought amid indications by a UN agency that over 8 million Zimbabweans would be food insecure this year.
Economist Tony Hawkins told Business Times the Covid-19 pandemic has seen a huge chunk of temporary workers being laid off and some taking huge pay cuts despite a difficult operating environment.
“We expect over 50,000 employees to lose their jobs by year-end due to the impact of Covid-19 pandemic to business compounded by perennial challenges such as forex challenges, power outages, droughts and rampant inflation.
“From the recent survey carried out, 23 per cent of the registered companies have trimmed permanent employees while 50 per cent of the companies have laid-off temporary employees to relieve pressure on the balance sheets which struggled to meet operational costs and wage bills,” Hawkins said.
While the impact of coronavirus to the informal sector is yet to be quantified, it is the hardest hit since most small to medium enterprises have closed with some failing to operate since March 31 2020.
Government is pushing informal businesses to register first before resumption of operations under new regulations, forcing a number to close or continue with backyard industries.
Hawkins estimated that around 700,000 workers are formally employed with the majority of them being temporary workers.
Experts said the fact that companies have successfully managed to produce commendable results with very few people at work has given companies the audacity to rationalise staff as part of cost-containment measures.
The prevailing difficult operating environment has made it imperative for companies to implement difficult decisions in order to manage costs to relieve pressure on revenue.
Companies have invested in technology to drive their businesses not only to operate more efficiently but to improve customer experiences.
In a survey carried out by this publication various companies said the adoption of new end-to-end administration systems in some of the companies accelerated implementation of digitalisation strategy, process and role redesign and job evaluation – making some roles redundant.
The human resources manager of a top firm, who spoke on condition of anonymity, said organisations review their operating model and structures from time to time to be fit for purpose and cost efficient.
Digitisation accelerated by advent of Covid-19 brought about a need for review of how companies operate and the skills needed for the changed way of working.
“The difficult economic situation we are in is characterised by sustained hyperinflation which has created downward pressure on revenue meaning that difficult decisions must be made on the cost side as well,” she said.
Economist Gift Mugano said given the myriad economic challenges, compounded by effects of coronavirus, the country is expected to experience serious economic meltdown.
“In my view I expect the economy to shrink by 20 per cent due to the recession that we have plunged into due to the effects of coronavirus and other challenges,” Mugano said.
“There won’t be a room to work from home as some work now requires physical presence for the companies to improve, especially industrial work.”
He said the government has not been generous to business in terms of the ZWL$18bn [US$180m] stimulus bailout package which is inadequate to service the industry which requires US$5bn to revamp the economy.
“Some countries like Botswana are giving some grants to companies so that they can continue paying salaries without straining their balance sheets but here [it is] one man for himself and God for us all approach. Jobs are under threat and there is a need for the government to come up with robust effort to save them,” Mugano said.
Companies said while businesses have been classified as essential services during the Covid-19 lock -down, and have therefore been allowed to operate under certain conditions, the restrictions on people movement and business trading hours resulted in a general decline in volumes across the economy.
The gradual easing of lock-down restrictions has seen a general improvement in recent volume performance in most business units, and this positive trajectory is expected to go into 2021.
The Zimbabwe Congress of Trade Unions’ president Peter Mutasa said the number could be higher than the 50 000 figure because they have hamstrung the informal sector which employs 60 per cent of the population.
“Companies will be forced to close because they depend on people’s salaries to survive when there is extremely weak purchasing power while compounded by lack of investors in the country, total state implosion is inevitable,” Mutasa said.
Employers’ Confederation of Zimbabwe president Israel Murefu said employers have “to save jobs as much as they can”.
“We are encouraging employers and employees to engage on what to do – whether to put employees on paid leave or not but all that has to be within the confines of law not to completely retrench workers who soldiered on in these difficult circumstances,” he said. – Business Times.