Financial Sector Spotlight: Rightsising is banking’s new black (2)

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In the previous instalment we saw how dollarisation, among other issues, negatively affected the cost structures of banks and forced them to restructure in order to survive.

The aftermath was job losses for over 2 000 people out of a 10 000, strong labour force.

In this article, we consider some of the key socio-economic outcomes of this rash rationalisation.

l Labour Disputes, If mishandled, retrenchment exercises can turn out to be bitter, protracted affairs that make labour lawyers rub their hands gleefully in anticipation of fees bonanza.

The Reserve Bank of Zimbabwe (RBZ) retrenchment case has already turned out that way due to delays in payments, which the retrenchees have been pursuing vigorously through all means at their disposal, including legal means.

Loss of skills — For retrenchees, enforced worklessness leads to loss of skills, or “deskilling”. For the remaining employees, the lack of both resources for and focus on training typical of the pre-retrenchment period also contributes to this deskilling.

The impact of this could be to delay, but hopefully not deny, Zimbabwe’s efforts to reclaim its former glory as a regional centre of financial excellence.

Training and retraining of those who remain in the fold and those fortunate to return to the fold after retrenchment is the only way to go.

Speaking recently at the Independent Dialogue Forum, Gideon Gono “noted that following introduction of the multi-currency system, some banking institutions have been concentrating on restructuring and other cost-cutting measures at the expense of staff training and upgrading of banking systems”. He encouraged banking institutions to prioritise training as this has a bearing on their stability.

Emigration, For many, retrenchment at such a massive scale makes the prospects of re-employment in the short to medium term decidedly bleak, especially as banks contemplate further staff rationalisation.

The Ministry of Labour and Social Welfare recently revealed that the government had approved the retrenchment of 2 913 workers during the first half of 2011, and the banking sector accounted for the highest number of approved retrenchments at 29% (845) of the global figure.

Against such background, emigration becomes a viable option for those not entrepreneurially, inclined.

The local economy loses human capital in the process, but the upside is that financial benefits immediately flow back from the Diaspora through remittances to support dependants who remain in the country.

Inevitably, the emigrants learn new skills, both survival and functional, in their adopted home, and widen their social circles in the process, but the downside is the Diaspora’s negative impact social and moral fabrics.

l Weakening of workers’ union, Depletion of the membership base has no doubt weakened the Zimbabwe Banks and Allied Workers Union (Zibawu) both in terms of financial muscle and bargaining power.

As at September 2010, Zibawu represented about 5 000 bank sector workers. In 2010, Zibawu president Peter Mutasa admitted “that this thing is now a direct threat to the union and the sector”.

The union could, however, lessen the impact of retrenchments by designing programmes that ensure their continued relevance in the lives of retrenchees.

For instance, they could broker a small-to-medium enterprise loan scheme such as the one put in place by NSSA for retrenched members who intend to venture into business, but are constrained by lack of capital.

In June 2010, Zibawu revealed that severance packages paid as at that date ranged from $2 000 to $3 000

A competitive labour market — When more people out of employment, the result is pressure on the few jobs available, which can whittle down the bargaining power for those still in employment.

Cost Savings — For the retrenching institutions, the biggest, and only advantage of retrenchment, some would argue, is immediate and future cost savings associated with salaries, pension and medical aid contributions, telephone, Internet, allowances etc.

Improved working conditions, The cost savings achieved by retrenchment exercises can be channelled towards improving working conditions for the remaining staff.

However, in some cases only marginal improvements have been recorded while in isolated cases, conditions are actually reported to have worsened.

Business start-ups — Retrenchment exercises are often accompanied by an entrepreneurial rash or what Simon Kayereka, an entrepreneur and strategy consultant, calls “entrepreneurial seizures” because they are usually involuntary and short-lived.

New businesses suddenly come into existence as retrenchees try to enhance the plasticity of their packages in order to generate income on a sustainable basis.

Some will fail and others will succeed. But either way, new skills will have been learnt in the process.

Giving advice to retrenched RBZ workers in early 2011 Gideon Gono implored them “. . . to look at the event as an opportunity to go out there and be an employer, use whatever little retrenchment package one gets to start something of a business, however small”.

Diversion of critical financial resources towards non-productive purposes, Bankers and industrialists have voiced concerns about how retrenchment militates against capacity building.

Confederation of Zimbabwe Industry (CZI) president Joseph Kanyekanye once said that retrenchment “takes the little money away from building capacity to funding redundancy.”

Weigh in with your insights on omen.muza@gmail.com.

Omen N. Muza is a banker and Managing Director of TFC Capital (Zimbabwe) (Pvt) Ltd who writes in his personal capacity