Econet to retrench, offers shares to workers who accept severance

Econet to retrench, offers shares to workers who accept severance

HARARE, October 7 (The Source) – Zimbabwe’s largest telecommunications company, Econet Wireless, will lay off an unspecified number of workers as it grapples with declining revenues and the effect of taxes imposed over the past year.

In a memo to staff dated October 2, 2015, signed by Econet’s chief human resources officer Innocent Magaya, the company is offering to workers who accept to be retrenched shares in the listed telco.

“The company intends to issue a retrenchment notice to the Retrenchment Board followed by negotiations directly with the affected employees and/or their representatives. The Company will be notifying the affected employees in due course,” reads the staff memo.

“The Company will award those employees who will accept the Company’s retrenchment offer some shares in the company. Although the offer for shares is not part of the retrenchment package, it is an incentive for speedy closure of the retrenchment process that will reward long service with the company. This award will only be available to those employees who have been identified for retrenchment, who voluntarily agree to abide by the process and timeframes outlined in the retrenchment process; and who do not institute any legal challenge against the Company. The award of shares will be done after the retrenchment process is completed.”

Econet said while it had instituted several cost-containment measures, including a 20 percent in salary cut, there was still need to pare down expenses.

“To avert massive retrenchments, the Company implemented special measures in terms of Section 12D of the Labour Act. Employees agreed on a reduction in working hours of 20 percent with a consequent reduction in staff costs,” Econet said.

“These measures have helped avert massive retrenchments. However, a review of the company’s structures has shown that there are some jobs that must still be lost, although at a much lower scale than would have been the case had the company failed to agree on the special measures with its employees.”

Econet has cited the decline in revenue as a result of a five percent tax on airtime sales introduced last year, along with a 35 percent voice tariff cut imposed by the industry regulator at the beginning of 2015 as reasons why it has to cut costs, including staff expenses.

The mobile network operator also bemoaned what it termed an uneven playing field in the telecommunications industry, which saw Econet being the only firm to pay $137,5 million in licence fees in 2013. Econet said it borrowed to raise the licence renewal fee and finance costs arising from the loan were eating into revenue.

Further, state-owned mobile network operator NetOne and terrestrial TelOne “have been failing or reluctant to pay their interconnect obligations which has put a huge strain on the company’s cash flows,” Econet said.

Labour law amendments passed in August set the equivalent of one month’s salary for every two years served as the minimum severance package.

In August, Econet chief executive Douglas Mboweni announced that the firm had saved up to $70 million through its various cost-cutting initiatives. He was at pains to stress that the 46 employees who left the company had not been retrenched, but “had other issues related to their contractual obligations.”

In the full year to February 2015, Econet’s after-tax profit was $70,2 million, down from $119,4 million in 2014, while revenue, at $746,2 million, was nearly one percent lower than $752,7 million previously.