Salary hikes to spur consumer sector

THE recent civil service salary hikes are set to boost the performance of the consumer sector as disposable incomes increase, a local research firm has said.
Last month government, in a move described by some as populist, awarded security forces a 22,5 percent pay rise before handing a 17,5 percent special allowance to all public servants.
Local research firm IH Securities (IH) believes that these increases will spur the consumer sector, which has been resolute in the face of stark economic hardships which have plagued the southern African nation.
“Activity in the retail operating environment is expected to remain relatively firm, with robust performance in primary sectors continuously aiding the group’s performance as disposable incomes and average spend expand. We also expect government’s salary hike for civil servants to give a rise to performance,” the research firm said in a report released this week.
IH says food retail is the most significant component of the consumer sector, with about 34 percent of total annual consumption expenditure being spent on food and groceries, and staples being the most popular food items. This compares with South Africa at 19 percent or the United Kingdom at 10 percent.
Growth is particularly expected in food and groceries, with OK Zimbabwe, which commands a market share of more than 30 percent, expected to profit the most.
The pay hikes have not only been good news for the economy as they have come as a further strain on an already stretched budget.
The country has a large public sector considering its level of income. The world bank says “the scope of it is a challenge to manage effectively” because public spending is dominated by the wage bill, government’s ability is limited — both in terms of delivering public services and in terms of conducting sound fiscal policy. Both the country’s capital budget and basic operations are underfinanced.
Apart from the pay hikes, growth in consumer spending is also anticipated as the economy is forecast to grow 4,5 percent in 2018, premised on strong performances in agriculture and mining which employ 68 percent of the country’s “economically active population”.
The agriculture and mining sectors are projected to grow 10,7 percent and 6,1 percent, respectively, in 2018.
Growth in agriculture is anticipated to emanate from increases in maize and tobacco output, with tobacco output for 2018 having already surpassed the peak of 236 million kg in 2000. newsdesk@fingaz.co