According to the Herald and ZBC, civil servants under the Apex Council and the government finally agreed on a pay hike that will see the January salaries of civil servants go up by between 133 and 172%. There will also be a Cost of Living Adjustment (COLA) which will also be backdated to 1 January 2020.

All this means is that this month end civil servants have much more money to spend. This pay hike will mean that the lowest paid government worker will earn $2 500 whilst the highest paid civil servant will earn about $4 631.

The good news

The good news from all this is that it means an end to the threatened industrial action by most civil servants such as teachers who will now go to work. It also means if you factor in allowances, all government workers are now earning above the poverty datum line.

Also as we pointed out yesterday, lots of businesses rely on the income that civil servants receive. This includes vendors, micro-finance institutions, domestic works etc. A salary boost means these dependant businesses are probably going to earn more.

The not so good news

As I just said, civil servants now have more money. Meanwhile the supply issues that we are seeing in the markets have not been fixed. A pay hike is not going to solve the fact that there is no subsidised mealie-meal in all shops.

What it means is that for some basics there is going to be too much money chasing too few goods and services. This is something we saw clearly in 2008. When there is too much money without improvements in supply prices go up. In fact some unscrupulous business people will raise prices anyway figuring civil servants are not going to mind since they are earning a little more.

Right now a lot businesses are petitioning government to be allowed to increase their prices/tariffs including mobile network operators. Now that the largest employed group in Zimbabwe has more money to spend they have another arrow in their quiver.