Econet says cost cutting measures save $70mln, denies ‘wholesale retrenchment’ accusation

Econet says cost cutting measures save $70mln, denies ‘wholesale retrenchment’ accusation

HARARE, August 21 (The Source) – Zimbabwe’s largest telecommunications group, Econet Wireless, has saved about $70 million after effecting cost-cutting measures, chief executive Douglas Mboweni has said.

In a statement issued on Friday, Mboweni said the company had laid off 46 workers and not hundreds as reported by some media outlets.

“We as a company opted to cut all salaries by 20 percent rather than undertake wholesale retrenchments. This we did after full consultations and consent of the majority of our staff,” Mboweni said.

“We have cut costs by almost $70míllion to date and restored strength and stability to our cost structure. We are ready to weather any storm as a company. It’s part of our DNA.”

Labour unions say over 20,000 jobs have been lost since a July 17 Supreme Court ruling that the Labour Act allows employers to terminate contracts on notice.

The government has since scrambled to amend the law and remove that clause, with the changes to the Act being applied retrospectively. Parliament passed the amendments this week and President Robert Mugabe is expected to assent to the law within days.

In May, Econet reported a 41 percent decline in after-tax profit for the year-ended February 2015, as a government-decreed voice tariff cut and taxes on airtime and mobile handsets ate into revenue.

Econet after-tax profit for the year was $70,2 million, down from $119,4 million in 2014, although revenue levels largely held at $746,2 million, less than 1 percent lower than $752,7 million previously.

This followed the introduction of a 5 percent excise duty on airtime sales, a 25 percent duty on handsets, and a 5 cents levy per transaction on mobile money transfers, over and above a 35 percent voice tariff reduction enforced at the beginning of the year.

In response, Econet effected a 20 percent salary cut and leaned on its suppliers to cut their charges by 15 percent.

“We did a deep analytical study of this and concluded that a 20 percent salary cut was the best approach. In Zimbabwe we need to remember that the U.S. Dollar is a double edged sword for this country. We should really consider quoting for goods in Rands, even when paying in dollars, it could help ease our liquidity situation,” Mboweni added.

Without elaborating, Mboweni suggested industry regulator, the Postal and Telecommunications Regulatory Authority of Zimbabwe (POTRAZ), needed to do more to create a stable industry.

“We all need to try and protect jobs but regulators like POTRAZ need to play their part by not unnecessarily destabilizing industries that are stable.”