Friday, August 31, 2007

Zimbabwe Enacts New Laws on Prices and Salaries

New laws on prices, salaries

Herald Reporter

NO ONE in private or public sectors can now raise salaries, wages, rents, service charges, prices and school fees on account of increases or anticipated increases in the consumer price index, the official and unofficial exchange rates, or valued added tax and duty.

The ban on indexing pay, prices, rents and fees to the CPI, an exchange rate or VAT — coupled with vastly increased powers for the National Incomes and Pricing Commission — was made by President Mugabe in regulations gazetted yesterday to temporarily amend two Acts: that setting up the Commission and the Education Act.

The regulations were made under the Presidential Powers (Temporary Measures) Act and fall away in six months unless Parliament amends the two affected Acts.

Under the regulations, all proposed fees, tariffs and charges by Government departments, State universities, statutory bodies, including statutory professional associations, and companies where the State is a majority or sole shareholder must be approved by the Commission in advance.

The Commission takes over the powers formerly possessed by ministers where ministerial approval was first required.

All fee increases by non-Government schools since June 18 are banned until the Commission gives approval. The Commission takes over the functions of the Secretary for Education, Sport and Culture in approving and setting fees at non-Government schools.

The Commission can only approve an increase if this is justified on some other grounds than the application of the CPI, killing the present link between fees and the CPI.

For all pay awards, and fee and price increases by the private sector, the Commission must now set standards after consultation.

It can set as a temporary standard the pay, fees or prices on a particular base date.

This would allow the Commission to start with the June 18 freeze date for prices, or any date it desires for pay, before implementing the standard system.

The net effect of the changes will be to push inflation down since all increases will be by less than the current inflation rate.

The regulations are less harsh than a total pay and price freeze but are designed to have a similar anti-inflationary effect. In the main ban on indexing salaries, rents, fees and prices to the CPI or exchange rate, an extra measure has been introduced to stop anyone getting around the ban by declaring an increase for some other purpose.

The regulations also totally ban any increase that would see a pay packet, rent fee or price rising to or exceeding the level it would have been if it had been indexed to the CPI or an exchange rate.

The only exception to the ban allows the Commission, when setting the standards for pay, service charges and prices to take the CPI as one of the factors considered. But only one increase a year in pay, fees or prices can be linked to CPI in any way, except for the pay of those earning below the poverty datum line for a family of four.

All sections of collective bargaining agreements, leases and contracts that call for increases to take into account CPI, exchange rate and VAT increases were declared void in the regulations.

For increases in pay, service charges and rents, the ban on indexing is total, "notwithstanding any other law . . ." For prices it is slightly different: "notwithstanding any other law to the contrary but subject to the Control of Goods Act . . ."

The bans on indexing were coupled with vastly increased powers for the National Incomes and Prices Commission.

The Act has been extended to the entire State sector. All Government departments, all State universities and all statutory bodies wanting an increase in any fee or charge must first apply to the Commission for approval. Where there is a law giving a minister the final power to approve tariffs, that power now goes to the Commission.

The regulations explicitly list the Broadcasting Authority of Zimbabwe, the Posts and Telecommunications Regulatory Authority of Zimbabwe, the Electricity Commission, the Reserve Bank of Zimbabwe (for regulation of bank charges) and State universities as those who must apply to the Commission before increasing any fee or tariff.

But it adds to the list: "Any other statutory body whatsoever, including a body established to regulate the conduct and discipline of members of a specified profession or calling that is required . . . to approve the level of fees and charges . . ."

This would imply that professions such as law, which is governed by the Law Society of Zimbabwe, would have to seek Commission approval before setting new legal fees.

Companies in which the State is the sole or majority shareholder formed as a successor to a statutory body — such as CMED, Printflow (formerly Government Printers), Government Medical Stores and Air Zimbabwe — and any other company in which the State is a majority or sole shareholder, such as Noczim, must have Commission approval before increasing any charge, fee or tariff.

The regulations made it clear, for the avoidance of doubt, that the Commission’s powers to seek information or inspect extend to all its new functions.

The Commission has been made larger, now having at least nine and no more than 14 members. All commissioners will be appointed by the President and the previous provisions giving groups such as organised business and labour the power to nominate have been scrapped.

The Commission is allowed, from time to time, to consult people and bodies it believes are representative of employers, employees and those who provide services or rented property to fix a standard by which pay or a service charge is to be determined or increased. It must, under the regulations, do this at least once a year.

It can set as a temporary standard once a year the levels of pay and service charges at a specified base date. This would allow the Commission to start, for service charges for example, with the June 18 freeze date.

Similar provisions exist for prices but in that case it consults people or bodies representative of those carrying on business in the course of which the goods in question are supplied.

Again, it can fix as a temporary standard the prices on a specified base date, presumably the date of the freeze when a price was allowed to rise as this year’s starting point.

For all standard rises in the CPI can be taken into account, but only once a year.

Besides temporarily amending the National Incomes and Pricing Commission Act, the regulations do the same for the Education Act.

The regulations temporarily repeals section 21 of the Education Act, the section that deals with non-Government schools fees.

Instead of the Secretary for Education dealing with applications for fee increases, and having to approve any application which does not exceed the percentage increase in the CPI over the previous term, the power to approve is transferred to the Commission.

This section of the regulations was deemed to have come into effect on June 18.

New fees, levies and increases in old fees and levies cannot be charged until the school’s responsible authority has applied to the Commission.

The application has to set out full details of the fee or increase, the basis of the calculation and must include proof that it was approved by a majority of parents at a meeting attended by at least 20 percent of the parents.

The Commission is forbidden to approve any increase unless the application is "justified by reference to some basis other than the application of the consumer price index" and has been approved by a majority of parents.

Once the application in the correct form has been received the Commission must, without delay, consider it with regard to the costs of operating the school, any programme for improving facilities, any representation made by parents, and any other relevant economic factors.

The Commission can then approve the increase, amend the increase and set its own fee which cannot be below the legal fee at the time of the application (the June 18 figure for the next application), or reject the application.

Similar powers previously possessed by the Secretary to deal with false information or misuse of fees are now passed to the Commission.

Where a school has charged unauthorised fees or levies, it can cause the excess to be refunded to parents or credited to their accounts.

Those who break the ban on indexing pay, fees or prices to the CPI or an exchange rate, and those who breach the standards set by the Commission when increasing pay, fees or prices, can be fined a level 8 fine, jailed for up to six months or given both punishments.

Those who increase non-Government school fees, refuse to pay back unauthorised fees, or refuse to take ordered corrective action over use of fees can be fined the equivalent of the excess, jailed for six months or be given both punishments.

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