Friday, February 20, 2009

Cost of Living trends

John Robertson
Sent: Thursday, February 19, 2009 5:17 PM

Now that the government has started offering wages and salaries in US dollar-denominated vouchers and many of the individual employees are receiving vouchers to the value of about US$100, new attempts are being made to assess the prospects of government and other employees being content to receive such amounts if this is all their employers can afford to pay them. Some dissatisfaction has been expressed already, even though the payments of February salaries have just started, and at least one government ministry has been warned that if the offers are not improved, those public servants will either go on strike or stay on strike.

A quick glance at the attached table will show that US$100 would meet a family's basic needs for only about two weeks. If that figure becomes the average around which most employers find themselves forced to work at this stage of what will hopefully become a recovery, an existing fact will be strongly reinforced: one income per household is not enough.

Zimbabwe's need of foreign assistance will rapidly become more intense as the full extent of the economic repair work becomes more widely known, but of most importance will be the pace at which Zimbabweans are perceived to be becoming deserving of that help. At the government level a poor start appears to have been made as on the very first day the world's observers became witness to several glaring breaches of faith. We ended that day with a Deputy Minister in prison and with a cabinet that was not only bigger than the one provided for in the Constitution, it is bigger than the cabinets of many countries that are a hundred times bigger than Zimbabwe.

To become deserving of respect and of the assistance the country needs, Zimbabwe will have to get its act together very much better than it has done so far. The focus should immediately be on confidence-building measures that include the return of the rule of law and respect for property rights, but would not have any room for a partisan judiciary or legislation that offers investors the certainty that they will lose control over their business assets. Neither will confidence return while the authorities isolate themselves -- and the country -- from the behaviour patterns that would encourage those who can assist to involve themselves and their capital in the rebuilding of our health and education sectors, our power, water, communications and transport infrastructure and our extensive manufacturing, mining, agricultural, tourism and service industries sectors.

Hopefully, the events in the coming weeks will successfully place Zimbabwe onto the right path. An extensively revised Budget is needed and much more persuasive political policy changes will be needed to make the important economic concessions work. By themselves, putting an end to price controls, manipulated exchange rates and deeply negative interest rates will not be enough.

In these early months at the beginning of a very difficult journey, the needs of employees will remain powerful determinants of behaviour and productivity. It is to be hoped that many households will enjoy incomes from more than one source, whether from remittances, lodgers or a variety of informal activities. Whatever they are, they will probably make the needed difference, as they have done during most of the recent years.

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