Friday, September 17, 2010

From John Robertson

Almost all the increases were countered by decreases in the prices of other goods and ten of these decreased by more than one percent. This left the overall index down by 0,15% at 94,96 for August, but compared to 91,66 in August last year, the figure is an increase of 3,6% for the year.

The Index has been decreasing every month since May this year, when it was 95,32. In the same months of last year, the Index was rising each month, so the narrowing gap has produced the falling year-on-year percentage change.

Comments about the Index in the last few months show that many people share the view that life in Zimbabwe is getting harder and therefore the easing inflation rate claim that is not supported by the perceived facts. Unfortunately, the very subjective perspectives that are brought into this debate make generalisations difficult, but many people agree that the hardships are mounting for reasons other than cost increases. They speak of increasing burdens imposed by family and extended family members who are unable to find steady employment and have found whatever efforts they can make in informal activities are yielding shrinking returns.

The difficulties are worsening, therefore, because the demands on those in steady employment are increasing. More jobs are needed, but employers are struggling too and a large number are more preoccupied with trying to fund retrenchment plans than with any thoughts of expansion. New investors are very few in number and the procedures and hurdles encountered by those trying to qualify for investment licences seem to have been designed to discourage them. For many families, remittances from family members working abroad were the main source of their spending power, but the evidence suggests that difficulties in Europe and South Africa have made the payment levels hard to sustain. Many are already returning from South Africa and most of them are likely to take some time to become contributors again.

Current conditions are unlikely to bring about the needed job creation. The labour unions have become particularly aggressive and very few wage settlements are reached without going to arbitration. The demands are making those employers who can fund any retooling exercise choose capital-intensive rather than labour-intensive production methods. As one example, new bottling plants in the major company referred to most frequently in claims that “the economy is recovering” need far fewer people to operate them. However, the limited bank finance available is holding back many of the business development plans, and the indigenisation policy has prompted many more of these plans to be shelved.

Even if prices remain steady for more months, the stresses at the household level seem likely to remain in place. As they will have their counterpart effects on government’s ability to collect increasing tax revenues and pay better salaries to public sector employees, we ought to be able to get government’s attention by offering thoughts on the ways that their own policy choices are to blame for many of these problems.

Kindest regards,

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