The Sunday Mail
PRICES of locally produced basic commodities are unsustainably high compared to imports, indicating manufacturers and retailers could be ripping off consumers.
While local manufacturers cite high production costs as the major contribution to their prices, questions have been raised over their profit margins.
Of particular concern is the price of the staple maize meal.
It costs between US$260 and US$290 to import a tonne of maize from Zambia. But 5kg of mealie-meal trades for about US$3,50, which means from one tonne the millers make anything between US$600 and US$700 from the US$290 they would have paid for imported maize.
Apart from the mealie-meal profits, millers also get maize bran after milling, which sells for US$1 500 per 30 tonnes.
The mark-up is rather high in an illiquid environment, more so for a staple food.
Some firms import processed mealie-meal, which retails cheaper than the local product. And millers tried to block mealie-meal imports and dragged Agriculture, Mechanisation and Irrigation Minister Dr Joseph Made to court stop issuing such import permits.
The High Court turned down that application last Thursday.
A business executive who spoke on condition of anonymity complained over the “exorbitant mealie-meal price which reflects a 100 percent mark-up by millers”.
“Such prices of selling mealie-meal for US$700 per tonne after importing maize for US$290 is criminal for a staple diet. Government must step in and protect consumers from these greedy and profiteering millers. They must stop it.
“Basically, millers are making super profits through exploiting consumers,” he said.
However, Grain Millers Association of Zimbabwe chair Mr Tafadzwa Musarara defended the pricing system saying millers were not making super profits given the high cost of production.
He said they were buying maize for US$320 per tonne — and not the US$290 Zambian farmers are selling at. Mr Musara said they then sold 10kg of mealie-meal for US$4,80; which most retailers then put on their shelves for between US$6 and US$7. Imported basic commodities such as cooking oil, soap, milk and rice are also cheaper than locally produced goods.
New Confederation of Zimbabwe Industries president Mr Busisa Moyo attributed the price disparities to a number of factors, chief among them the high cost of Zimbabwean labour, transport, electricity, finance (interest on loans) and taxes.
This has made locally produced goods less competitive, prompting Government — through the Industry and Commerce Ministry — to restructure the National Pricing and Monitoring Commission into the National Competitiveness Commission. The rebooted Commission will focus on improving ways of doing business with the ultimate aim of ensuring price reduction.
Mr Moyo said South Africa, Mozambique, Botswana and Zambia’s labour costs were 30 percent lower than in Zimbabwe; while transport and electricity cost between 25 and 30 percent more here. According to a cost-driver analysis by Government, imports soared twice as fast as exports in the past five years, raising the import bill from US$1,26 billion in 2009 to U$4,2 billion in 2013.
The study further revealed that borrowing from banks was expensive in Zimbabwe with average interest rates hovering around 28 percent per annum while Mozambique’s stood at 15,3 percent and South Africa’s at 8,5 percent.
With regards to taxes and permits, the study indicated that it cost a staggering 1 500 times more for an environmental impact assessment in Zimbabwe compared to South Africa.
Mr Moyo said of these statistics: “In Zimbabwe, we need to address a lot of things for us to match regional prices. Firstly, the cost of funding should be addressed because it is expensive to borrow from banks, although interests rates have slowly been reduced. Further, the loan tenure is too short, business needs 10 year loans to re-tool
“You would realise that imported goods are cheaper because some countries like South Africa offer incentives to companies which export; so the playing field is not level. We also encourage local companies to export to increase market and this will slowly push prices downwards.”
Consumer Council of Zimbabwe executive director Ms Rosemary Siyachitema said consumers were forced to buy cheaper imports although locally produced commodities were of higher quality. She also spoke of the need for new machinery for ailing companies, whose capacity utilisation — according to a CZI manufacturing survey — stood at 36 percent.
“We have to improve our agriculture sector since our economy is agro-based. This will help us to buy Zimbabwe because consumers prefer local goods,” said Ms Siyachitema.
Cabinet has recommended a raft of measures to address challenges facing industries through adoption of a holistic cost reduction model to bring down utility and regulatory costs like permits, levies and licences.
Plans are also underway to slash parastatals and councils salaries because the current wage bill is costly to the public, who foot the bills through taxes. Cabinet recommended that electricity tariffs be reduced and independent power producers be licensed.
