Mugabe backs Gono plan to freeze salaries and prices

By Tererai Karimakwenda
16 February 2007

The so-called Social Contract outlined by Reserve Bank governor Gideon Gono in his last policy review has received approval from Robert Mugabe. Due to go into effect from March 1 st this year, the plan basically calls for a salary and price freezing trial period of four months in an attempt to rein in inflation which is the currently the highest in the world at just under 1600%. But top economists have already slammed the idea saying it needs approval from employers and business and will not likely have any effect on inflation. Freezing salaries at their current levels will also be problematic for Mugabe because doctors, teachers, and other civil servants are all already striking demanding much higher salaries.

Economist John Robertson expressed doubts that this plan would succeed saying the government needed legal support from the so-called contractors in order to gain authority to impose it on the people. This means the approval of the employers’ organizations and the trade unions that represent workers. He added: “As far as I know they’ve not yet talked to or established some kind of contract with the trade unions. And I think there lies one of the more serious dangers behind the whole thing. There’s a very strong possibility or probability that trade unions will not like the idea because they’ll not trust the system to deliver constant prices, constant rents, constant costs for them while they are forced to accept constant wages.”

Another economist Erich Bloch saw some merits in the contract but agreed with Robertson’s view it would fall short due to lack of participation by the other stakeholders.