THE United States Agency for International Development food security arm, FEWS NET has warned that the plight of workers in Zimbabwe will worsen as a result of poor incomes.
BY TATIRA ZWINOIRA
The report came at a time the economic crisis, characterised by a debilitating liquidity crunch, acute fuel and foreign currency shortages, low capacity utilisation, dwindling foreign direct investment, and runaway inflation that is galloping towards 800%.
“Large numbers of people employed in both the formal and informal sectors will most likely continue to earn below-normal incomes,” FEWS NET said its June 2020 to January 2021 Outlook, released last week.
“A large section of the informal sector in both urban and rural areas will likely face challenges resuming activities following COVID-19 disruptions due to lack of capital or social support systems and local authorities’ compliance requirements.”
Driving the income erosion is the depreciating Zimbabwe dollar that has seen an astronomical hike in the cost of goods and services.
The annual inflation rate stood at 786% in May, while renowned American economist Steve Hanke put the figure at 1 302%.
According to FEWS NET, shortages of basic commodities and increasing prices of basic food commodities — including maize meal, cooking oil, sugar, and flour — are expected throughout the outlook period.
“The macroeconomy is expected to remain volatile. Despite recent RBZ (Reserve Bank of Zimbabwe) measures, parallel market exchange rates are likely to continue to influence pricing on the markets,” FEWS NET said, adding that the increasing use of the US$ for local transactions is expected to affect poor households earning local currency.
FEWS NET said below-average opportunities for self-employment, petty trade, cross-border trade, and other informal sector activities were driven by the poor macroeconomy and impact of COVID-19 travel and border restrictions.
The agency has predicted a drop in diaspora remittances due to the COVID-19-induced global slowdown, with the southern and western parts of Zimbabwe worst affected.
Harare, with more than 2,6 million people — about 20% of the population and 50% of the urban dwellers — will be the most impacted by wage erosion than other cities.
“Official national unemployment rate is about 16%. In Harare, official unemployment is around 9%, lower than the national average. However, independent estimates indicate much higher national unemployment rates,” FEWS NET said.
“The poor macroeconomy is critically impacting low-income households in Harare with most of the urban poor having little to no savings and living from hand to mouth, while some are in debt. Most incomes for low-income households in Harare are below the ZimStat food and total consumption poverty lines.”
Until mid-June, most informal sector enterprises were closed due to the COVID-19 national lockdown, with some traders losing their stock and vending space.
However, privately-owned commuter omnibus operators and pirate taxis remain banned.
FEWS NET said some domestic workers were also negatively impacted by government restrictions associated with COVID-19 through job losses and reduced wages as their minimum wage averages $950 or US$15.
Wage deflation is affecting private and government employees who also face high transport costs and rentals charged in forex.
“Some urban poor households end up coping by reducing number of rooms, thereby crowding in very limited spaces, sending some household members to rural areas, and/or relocating to cheaper peri-urban areas,” FEWS NET said.
ZimStat reported a 14% increase in the food poverty line and the total poverty consumption line from April to May, while the Consumer Council of Zimbabwe indicated the cost of living for an average urban household of six rose 22% between April and May.
“The CCZ calculated food basket increased by 35% over the same period. Unfortunately, household incomes for most poor households are relatively stagnant and have not increased with the cost of living,” ZimStat said.
Economists point out that in the midst of declining wages, the only solution for workers is to receive United States dollar salaries.