Economist Chibamba Kanyama says there is need to review exorbitant packages of top government officials and parastatal heads, as some do not correspond to the value of contribution they make to their respective organisations.
And Kanyama says President Edgar Lungu’s decision to slash his salary and that of top civil servants is likely aimed at thwarting, in advance, any intentions by trade unions to negotiate salary increments.
In an interview, Kanyama, who is Bridges Limited managing consultant, noted that some parastatals were offering salaries which they had no capacity to pay.
“Admittedly, the packages for some of the top government officials, including some parastatal chiefs, do not correspond to the value of contribution these individuals make to the respective organisations. The packages are generally benchmarked against what similar organisations in the private sector pay and not so much on the capacity of these organisations to pay. There are parastatals that have perpetually made huge losses and yet the total cost of employment attributed to the top management of about eight people accounts for 80 percent of total staff costs. It is against this backdrop, I support the general call by President Lungu to review these packages so that they are deescalated in line with the financial position of the government Treasury and state of these state owned enterprises,” he said.
“I do not agree with the notion that to get the best Chief Executive Officer in a parastatal, the pay package should be aligned to what prevails in similar organisations in the private sector. First, it is very possible to get a very brilliant managing director in a parastatal these days at half the current cost. Just for your information, without suggesting to recruit foreign nationals, I have been recruiting expatriates for a certain private company in Zambia. The highest salary for a very competent Zimbabwean professional to head a company is US$60,000 per annum all-inclusive but this is nearly the total cost of employing a local executive per month. We recruit Indians at Director level and they ask for US$3000 all-inclusive package per month. Second, the private sector maintains subdued salaries for CEOs but emphasizes on share options and performance bonuses. In other words, you only get fully rewarded when you add value to the company and this does not exist in the parastatals.”
He said it was inappropriate for government officials and heads of parastatals to earn so much while the economy was ailing.
“I am looking at the President’s directive to reduce the salaries within the broader context: There is need for an extensive review of packages awarded to the top executives and senior civil servants in Zambia so that they relate to what we earn collectively. It is inappropriate to accumulate so much wealth at individual level while the economy remains in perpetual deficits and companies we manage are always in the red. Of course a single reduction in the President’s salary may not have significant impact but if this is structurally done across the board, the impact will be huge. There is the argument of existing contracts, and indeed, according to labour law, you cannot adjust the conditions of service downwardly without consent of the affected party. However, given that it is a directive from the Head of State, it implies individuals will give written consent for such adjustments to be made,” he said.
Meanwhile, Kanyama noted that this could spell no salary increments for civil servants.
“I also suspect the President had the bigger picture when he made the directive. His focus is most likely aimed at thwarting in advance any intentions by trade unions to negotiate salary increments as a response to rising cost of living induced by inflation (adjustments to ZESCO tariffs and fuel prices). The government can easily argue to the unions that austerity applies to everyone in the system as exemplified by the reduction in salaries by top civil servants and parastatal heads. By doing this, government will be managing potential spiral inflationary pressures if salaries for civil servants were to be adjusted upwards. Secondly, particularly for parastatals, a cut in salaries would enable the lowest paid in the respective organisations to receive marginal pay rises to mitigate the impact of inflation,” said Kanyama.