Word for word: ZACCI position on the new minimum wage and conditions

Introduction

The Zambia Association of Chambers of Commerce and Industry (ZACCI) appreciate governments concerns and efforts in ensuring that workers are treated fairly and remunerated accordingly in line with the cost of living. A lot of countries have minimum wages and ZACCI is not opposed to having a minimum wage for various categories of employment in the country. It is the Chambers expectation that such an initiative on the minimum wage should be able to support business growth, facilitate employment creation and should take into consideration the prevailing business climate conditions.

Concerns of the Business Community

Much as we appreciate the good intentions of the government to put more money in the pockets of the employees and to improve the conditions of employment and living standards, the manner and process in which the new minimum wages and conditions of Employment have been imposed on the employers leaves much to be desired in terms of relating to the various businesses to implement and remain sustainable.

1.   Firstly, ZACCI observes that the larger business community was not thoroughly and exhaustively consulted in coming up with the New Minimum Wages and Conditions of Employment especially that this impacts on the viability of the businesses. It seems private sector efforts at dialogue are being frustrated by the lack of extensive consultation on such pertinent issues which tend to be unilateral regulations.

2.   The categories/grades that have been provided are still generalised. The categories in the Statutory Instruments equate a shop along Cairo Road in Lusaka at the same level with a small shop in a market in Mkushi. Also, employees with similar skills and qualifications but working in different sectors cannot always earn the same amount due to differences in the sectors. It is important to establish thresholds for various categories. For instance when we talk about shopkeepers, what size of shop in terms of number of employees or turnover/revenue etc.

The best thing would have been to categorize or classify the businesses into micro, small, medium and large scale for each wage category and apply the wages accordingly. Prevailing business conditions in the various sectors and location should also be taken into consideration.

3.       No time has been given to the employers to deal with productivity and capacity enhancements to be able to cushion the increase in the labour costs. An analysis of the new minimum wages indicates that the new regulation increases wages ranging from 48% to 57% starting July 2012. Companies have already done their budgets and they are half way through the year and they are now being compelled to make adjustments that may have far reaching implications. Some companies already have fixed sum contracts running. This means that ongoing contracts may not be subject to upward adjustment to accommodate the new salaries and wages demanded in the new wage structures especially that fluctuations in contract costs are usually based on 10% – 20% increases across the board. And no business had envisioned a 48% to 57% increase in labour and therefore would not have catered for this. Enough time needs to be given for these adjustments to be made for businesses to survive with these changes.

4.    Some companies and businesses in certain sectors already have their own collective agreements and would have hoped that the Ministry of labour would have made their intentions clear, especially with respect to the phrase “and such conditions shall not be less favourable than the provisions of this order.” Some collective agreements put a total minimum wage that is higher than the total minimum wage indicated in the regulation but whose components, such as Basic wage and allowances vary. The Ministry needs to clarify and confirm if this is acceptable. The resulting Statutory Instrument that is making it mandatory for industry to comply with Basic Wage is unsustainable given the intricacies of the collective agreement and the liabilities that ensue.

5.     It is a fact that the increase in the wages as result of the New Minimum Wage and Conditions of Service will increase the cost of production for many businesses more especially the Micro, Small and Medium Enterprises (MSMEs). Furthermore, the higher labour cost will have to be recovered and will result in increased cost of goods and services. The good intentions of improving the wages might result in the inability of the employer to maintain the same number of employees and result in layoffs, slowdown in new employment and general unemployment. This situation is compounded by the fact that businesses are already carrying heavy financial burdens due to the various structural constraints in the business environment such as the increased load shedding by ZESCO.

With increased cost of production, some businesses will definitely have to downsize and lay off part of their workforce, especially the less qualified and less experienced for qualified and experienced employees who can work more efficiently and effectively for those kinds of wages. Others will merely pass on the increased cost of production to the consumers. In some instances, there shall be an increase in casual labour employment for specific tasks within a company (such as loading a truck, off-loading a truck, digging a drain, specific construction tasks, etc.). In the long-run, some businesses will even consider computerisation, automation and mechanisation of some processes thereby reducing the employment creation drive.

Whatever the option that businesses will adopt, it has the potential of depriving the employees of even what they are earning currently by creating more unemployment and increased cost of living. This will be in contradiction to the very intentions of government.

6.    It seems that there was no policy direction when reviewing the minimum wage, to deal with the resulting high cost of production. Such a policy would have taken into account both employees welfare and the cost of production, to avoid plunging the economy into price wage spiral inflation. Wage increases without corresponding increase in production only result in an increase in the price of commodities. This will eliminate the very thing that the minimum wage is intended to achieve. Increases in commodity prices will nullify the very gains that the New Minimum wage is trying to achieve due to the reductions in the disposable income.

7.     The New Minimum wage has not paid attention to the quality of Zambian labour. The majority of the labour force being covered in the New Minimum wage does not have the proper and relevant skills. If an assessment was done on the qualifications held by the majority of these employees in Zambia, it would be quite clear that many of these workers do not have genuine trades certificates. Government should work on how to develop more relevant skilled labour that can negotiate their own pay package in Zambia or elsewhere and let market forces prevail. Furthermore, the increased wages should go hand in hand with increased productivity and integrity at the place of work.

As much as employees need revised minimum wages and conditions of employment, there is also need for government to simultaneously develop policies and laws that will further support private sector development so that businesses, of whatever size, can be able to provide decent employment and meet the statutory requirements and obligations. A conducive environment in which to conduct viable and profitable businesses in Zambia is yet to be achieved in this country though there are some improvements.

ZACCI recommends that government heeds to the concerns of the business community and addresses them accordingly. Based on these concerns, government should reconsider the wholesome implementation of the new minimum wages and conditions of employment so as to balance the employer to employee relationship from that of confrontation to that of mutual benefit and growth. This should be a consultative and dialogue process at every stage.

Conclusion

Now that Government has stated and passed its position, we call for continued dialogue so the positives from the statutory instrument are built upon and any point seen to be short-coming are developed up. Dialogue must recognize the basic fact that employers have also got rights and their voice should be heard. The Chamber further notes that there-is-no-one-size-fits-all-solution to such challenges. Certain measures in reducing the levels of poverty from Extreme poverty to Moderate poverty will cause concerns, but dialogue and sustained engagement remains a notable instrument in addressing poverty and economic development.

Geoffrey Sakulanda

PRESIDENT

 

 

 

 

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