Zim, a nation of debtors

HARARE - Zimbabwe, which owes multilateral institutions over $10 billion, is sinking beneath a tide of debt.

A spate of recent reports have revealed how perilously close to the edge many are.

In a nation where as many as 70 percent of people live on less than a $1 a day, according to the United Nations, with the average household now owing around $2 000, just a slight change in circumstances could tip the most vulnerable over the precipice.

Economic analysts say the country’s decision to default on its obligations in 1999 coupled with worsening economic conditions has resulted in the majority of Zimbabwe’s 13 million people becoming comfortable with debt.

In the past three years, millions of Zimbabweans have simply stopped paying utility, water, electricity and other bills due to declining economic conditions coupled with rising unemployment rate — estimated at over 85 percent.

This cycle of bad debts engulfing the country has forced local government authorities and national power utility Zesa Holdings to institute legal proceedings against defaulters.

Reserve Bank of Zimbabwe governor John Mangudya said it was crucial for the country to clear its arrears with the International Monetary Fund (IMF), the World Bank and the African Development Bank among other creditors not only to get fresh capital but also to show citizens the importance of servicing loans.

“I am surprised by some people in this economy who do not want us to pay these arrears. It is critical to note that it is Zimbabwe that owes multilateral and bilateral creditors and not vice-versa,” he said.

The central bank chief said he sometimes finds it a bit difficult that the country is being pulled backwards by people who should be leading by example.

“If it is being smart, colleagues I beg to differ. We are closing ourselves in a hole. We need to be very careful about the clearance of arrears. We are not doing it for Mangudya or for the government. It is being done for the people of Zimbabwe,” Mangudya said.

“Let us put our heads together, this economy is ours together. We all belong here, if the economy is burning we all burn together. It is suicidal not to pay the arrears, because they will continue to accumulate therefore we are not being clever by doing so,” he added.

This was after Zimbabwe’s plan to settle its arrears to the IMF, World Bank and AfDB is facing stiff resistance from some quarters in government who believe the money should be used for other developmental purposes.

Market watchers said the country must implement strong reforms to revive its waning economy through increased productivity and reversing the unemployment cycle and current liquidity and cash crisis.

A recent report by the Labour and Economic Development Research Institute of Zimbabwe (Ledriz) revealed that people were failing to service their debts as they are not receiving their salaries and wages on time.

“More than 80 000 workers out of the 350 000 in formal employment in 2014 did not receive their wages and benefits on time in both the public and private sectors,” the report said.

The study, titled Working Without Pay: Wage Theft in Zimbabwe, was carried out in 2015 on 442 companies.

“Many of these workers have gone for more than 12 months without receiving their monthly wages but are still expected to come to work without fail. The non-payment of wages is no longer only a private sector phenomenon but has extended to the public sector, where many workers are also going without pay. Both the government and parastatal institutions have been complacent about dealing with this issue,” the report added.

Zimbabwe Banks and Allied Workers Union president Farai Katsande said the issue of debt among his members was a major cause of concern due to the rising unemployment rate.

“In Zimbabwe, once you get out of employment, there is very slim chance, if any chance at all, that you will get alternative employment,” he said.

According to the Zimbabwe Congress of Trade Unions (ZCTU), between 25 000 and 30 000 workers have lost their jobs since a July 2015, Supreme Court ruling which allowed employers to terminate contracts without giving any benefits or redundancy payments, as long as their workers were given three months’ notice.

“We have nasty incidences happening as a result of the Supreme Court ruling. Our members, that include those of banks, have been dispossessed of their properties,” ZCTU’s secretary-general Japhet Moyo said.

“We have had incidences of high levels of stress among our membership and many are under medication. It’s a big crisis,” he added.

In an effort to retrieve over $1,075 billion it is owed by consumers, mostly parastatals, local authorities and private companies, the Zimbabwe Electricity Distribution and Transmission Company (ZETDC), which owes creditors $987 million, and a further $330 million in loans, has approached the courts.

The company’s managing director Julian Chinembiri said Zimbabweans were cultivating a bad culture of not servicing their bills.

“There was a debt write-off for farmers in 2013 but you can see where they are now. They owe us $84 million,” he said

Over the past few months, the Harare City Council, which is owed in excess of $400 million in unpaid bills by residents and industry, has embarked on massive water disconnections for non-payment of water bills, by-passing meters and bribery of meter readers.

This was after city fathers had served about 20 000 defaulters with summons to attach properties as it moves to recover money owed in unpaid bills by residents.

Comments (1)

It's a shame to keep such a government in the power

Slim Cat - 19 September 2016

Post a comment

Readers are kindly requested to refrain from using abusive, vulgar, racist, tribalistic, sexist, discriminatory and hurtful language when posting their comments on the Daily News website.
Those who transgress this civilised etiquette will be barred from contributing to our online discussions.
- Editor

Your email address will not be shared.