The Sunday Mail
Taurai Changwa
A cursory look at any supermarket shop shelve in Zimbabwe will undoubtedly prove that prices are indeed going up.
Whether this phenomenon is justified or not is a debate for another day.
For example, a ream of bond paper that used to be quoted at $5 is now changing hands at $11, which is nothing short of ridiculous.hether this phenomenon is justified or not is a debate for another day.
Even though prices are trekking northwards, unfortunately wages and salaries remain stagnant.
In a hyperinflationary environment, prices and wages often compete in rising, and this often keeps feeding the trend.
In the current environment, however, this is not possible, which means that at some point in time demand will be elastic.
Most companies in the service industry are finding it increasingly difficult to hike prices as consumers continue to resist unjustified prices.
Though some economists agree that foreign currency shortages could be the reason behind soaring prices, the regularity and margin of increases suggest an element of greed.
What is worrying in some instances is that it is the ordinary people that are at the receiving end of retailers’ predatory behaviour.
In an economy where earnings remain pegged, what this means is that the amount of goods one can buy is now considerably less.
While the introduction of bond notes were welcomed by the market as an ingenious intervention to fight cash shortages, the creation of artificial RTGS (real time gross settlement) balances – which does not seem to have real value underpinning them – have arguably undermined their value.
Such anomalies, not surprisingly, lead to arbitrage.
The situation can only be addressed if the productive sectors of the economy are able to supply as much forex as possible onto the local market.
But Zimbabwe is not producing enough.
Since the little foreign currency that is available therefore has to be rationed, this does not mean companies that cannot readily benefit from the facilities have to close shop.
They naturally buy the forex on the black market.
However, even the companies that qualify to get allocations from the central bank and delay in processing the payments are leading to supply bottlenecks, and this is not healthy for businesses.
There are a lot of questions that policy makers need to answer today.
What then must be done to ensure that prices do not continue to skyrocket?
Should the bond notes be demonetised?
How can the general public’s confidence be restored?
Will the money that is in bank accounts today have the same purchasing power in a few months’ time?
Government has to decisively deal with these challenges.
Zimbabwe must find a way to ensure that foreign suppliers are paid on time.
In as much as we want to save foreign currency in the country, we cannot deny that we want to trade, jobs need to be saved and the general public need to eat.
With wages falling behind price increases, not only are our living standards falling but income inequality has widened.
Government really has to be concerned about the welfare of consumers.
Zim-Asset has made positive strides, but it needs to be deepened to ensure job creation and poverty eradication.
The onus is not on Government alone.
It is challenges as the ones we are experiencing that help engender entrepreneurship and innovation.
However, their efforts need to be complemented by an enabling environment.
The private sector needs to be given an opportunity to grow.
Creating jobs is one great way to reduce poverty.
When people have jobs, they have income, and when people have income, they can more easily lift themselves out of poverty.
The United Nations says “unemployment and underemployment lies at the core of poverty”.
“For the poor, labour is often the only asset they can use to improve their well-being.”
If the country is to make determined strides, there is urgent need to clamp down on corruption in all its various forms and stations.
When governments are accountable to their citizens for their action, or inaction, in different areas of the budget, the citizens will be able to accurately assess how well their leaders are leading their country.
Also, it allows citizens to see if money is being taken away from poverty-reduction plans and is going into the pockets of some unscrupulous leaders.
Quite clearly, there seems to be a crisis of confidence in the market.
Where consumers don’t have confidence, they would rather not use cash, especially hard currencies, but use alternative payment platforms such as plastic money and mobile money payment platforms.
Cash is now very scarce and that should not be the case.
Yes, plastic money is an excellent payment method, but it should be optional.
As budget consultations are now underway, there is need for Government, particularly the Ministry of Finance and Economic Development, to help come up with a practical and effective plan of action to move the economy from the current situation.
While it is clear that a return to the 2008 scenario is not possible, it must be acknowledged that the economy is not in great shape.
A lot still needs to be done, and has to be done.
Recovering commodity prices and a successful agricultural season should be used as a springboard to a new economic future.
l Taurai Changwa is a member of the Institute of Chartered Accountants of Zimbabwe and an Estate Administrator. He has vast experience on tax, accounting, audit and corporate governance issues.
He is a director of Umar & Tach Advisory.
He writes in his personal capacity and can be contacted at [email protected] or Whatsapp on 0772374784.
