Exercise restraint on price hikes

Dr Mike Bimha
In September 2017, prices of basic goods went up as a result of social media speculation. “News” circulating then was that basic commodity shortages and price hikes were looming.

Panic buying set in, and that was a natural reaction. Our people tend to believe anything on social media even without evidence. Cabinet subsequently assembled a taskforce to consider these issues, with short- and long-term measures on the table.

Long-term measures
What we require is confidence – both locally and internationally – and a lot has been done since the new dispensation’s coming. President Mnangagwa has said we will put economic management at the forefront, with politics following. The President is saying here that we want to grow our economy, create jobs and produce goods and services.

When this becomes the thrust, it means all policies will be directed towards that common goal. Every ministry will be asking itself: what are we doing to contribute to economic growth? That’s building confidence internally and externally, and that’s what this country requires. At the end of the day, the three-tier pricing system, black market and other concerns are confidence issues. Government is engaging, building confidence.

Industry players, on the other hand, should generate foreign currency. The problem is those who need foreign currency are not themselves generating it.

We should generate foreign currency through exports, but we are helping them, hoping they will generate their own in future.

Short-term interventions
Presently, Government is appealing to industrialists, asking them to exercise restraint and to understand that consumers are out there. They should also understand that authorities know their overarching objective to make profits. However, those profits should be made via reasonable means. This means mark-ups should be reasonable.

So, we are appealing to them. Sometimes we make blanket statements, saying all retailers and producers are to blame for price hikes. However, in certain instances, it is retailers and not producers. On other occasions, it is a few retailers and not all of them. On the other hand, some distributors effect their own mark-up prices.

Now, we are carrying out a scientific and objective analysis of the entire value chain. For instance, what does it cost Producer A to manufacture a particular product? This is called cost build-up; that which goes into your production cost. We must know what it costs one to produce and come up with a reasonable mark-up enough to make a profit.

Then it goes to the retailer.
What value does the retailer put into his/her product by transporting, warehousing and passing it on? These are all stages of the value chain. We want to scientifically analyse the cost build-up so that we agree as a collective on a reasonable price.

Government will not come up with specific prices. No. Industry players themselves will be involved, participate in the process and agree on reasonable prices.

This is the exercise we have started and some prices have gone down in recent weeks as we started engaging various stakeholders, including the baking and meat industries. We have tasked the National Competitiveness Commission to go through value chains linked to basic commodities.

Dialogue is good as it enables Government to fully appreciate constraints producers and retailers might be encountering. Some cite foreign currency shortages, saying they are passing the cost of sourcing money from the black market for raw material purchases to the consumer.

We need to assess whether this is true, and if true, this concern has to be addressed.

What do we do about it? All these issues do not solely relate to the Industry, Commerce and Enterprise Development Ministry but monetary authorities, too. Thus an assessment gives us full knowledge of all facets.

We are saying certain businesses might want to adjust prices, justifiably so. Then others might just want to run with the wind and increase prices without justification. Some businesses increased prices just because we are in the festive season!

As I have mentioned before, we do not want to punish 10 people for the sin of one. Let’s identify culprits and deal with them later. Let’s dialogue, engaging each other. Let’s do it the scientific way, and I believe the NCC is the right channel to do that.

So far, we have engaged the Reserve Bank of Zimbabwe and Finance and Economic Planning Minister, Honourable Patrick Chinamasa, on forex shortages and they are keen to come aboard. A lot of producers have approached us over forex and the RBZ is assisting them. We have, however, found out that some have been using the forex card as a scapegoat to hike prices.

 New dispensation
The new dispensation in Zimbabwe supports value addition and beneficiation. This is at the core of the Industry Ministry and Zim-Asset.

You can only grow an economy by producing, ensuring the country is efficient and productive, creates jobs and can export. And that’s what the new dispensation is all about.

So, we feel comfortable that the new dispensation is line with our objective of industrialisation, boosting domestic and intra-Africa trade. Government wants to empower manufacturers to produce for the local market at affordable prices and to export into the region and beyond.

We have put in place a number of measures. Statutory Instrument 64, for example, indicates our desire to promote domestic industry. Further, we are working on a local content policy aimed at bolstering local manufacturing.

I’m not talking about big companies only here, but even SMEs which we want to perform better and export. Support will always be there for them to compete on the big stage. The local content policy is one of the objectives of our 100-day programme.

Due to changes that took place nationally, some programmes lagged behind, but the idea is to speed them up and that is why this is in our 100-day programme. The policy will be at an advanced stage within the first quarter of 2018.

We need to finalise implementation of the Zisco plan within those 100 days. In addition, we are looking at a cotton-clothing strategy. Various measurables should be achieved within that prescribed timeframe. And we also want to come up with a database of all SMEs.

We are talking about anyone involved in some productive activity; it could be in the informal sector or big corporates. We need to know who is where, who is doing what for us to provide optimum support.

Dr Mike Bimha is the Minister of Industry, Commerce and Enterprise Development. He was speaking to Sunday Mail reporter Debra Matabvu in Harare last week.

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