The Sunday Mail
Christopher Mugaga
The Zimbabwe National Chamber of Commerce is disappointed with how general price levels have taken a northward trend in the last three months.
The increases came on the back of Zimbabwe’s official inflation rate being pegged at nearly three percent as of November last year. What is of concern is that when inflation reached 5,3 percent in May 2010 and after adoption of the multi-currency system, prices remained manageable.
So, what is happening now to warrant price increases? The general conclusion has been that the hikes emanate from foreign currency shortages.
This has seen local businesses that rely on imports of production inputs turn to illegal channels to source foreign currency at a premium. As long as foreign currency shortages remain, industry’s capacity to satisfy the market will remain weaker.
On the other hand, credit to the private sector will remain compromised. This is a result of high cost of funds following a depreciated Real Time Gross Settlement value compared to other payment methods.
Most ZNCC members have resorted to buying foreign currency on the black market given that the Reserve Bank of Zimbabwe’s import priority list cannot satisfy the obtaining foreign currency demand.
Informal economy
An informal sector by nature is characterised by low productivity, moonlighting, lack of discipline and innovation as well as propensity to profiteer in reaction to policy pronouncements. For instance, an import ban on certain commodities leaves the informal economy with an edge to hoard, creating artificial shortages as we witnessed with commodities like cooking oil in recent weeks.
Unregistered informal sector players are competing unfairly with registered formal sector players who offer similar products or services but with added fiscal obligations.
The dominance of the informal economy means we can no longer rely on official inflation figures since greater traffic of transacting is now taking place in the underground economy. As long as we have undesignated sites for trading in our urban sites, it is difficult to monitor price levels.
Profiteering spirit
A month ago, parallel market rates were stagnated, especially with the ushering in of a new political dispensation. The festive mood saw a number of players, notably from the retail side, raising prices of products such as bread and we can argue that this was a result of greed.
An interaction with millers and wheat farmers has confirmed that there were no major cost shifts of late. Some players took advantage of the September confusion and the festive mood to seek additional profit.
Disrupted value chain
There is need to work together in interrogating the existing value chains. The major threat on the market today are middlemen who post huge margins than both the producer and retailer. We have experienced a bad value chain which has seen inconsistencies in the pricing culture.
The deeper analyst of value chains might not justify the price increases; we saw meat prices going up recently and even abattoirs could not explain the situation. However, there are cases where low production has exposed the final products to foreign currency realities.
For example, inasmuch as the whole of Sadc is a net importer of soya bean products, last season saw soya production at 30 000 tonnes for Zimbabwe, 119 000 for Malawi and 300 000 for Zambia. We are aware there is a programme to grow 700 000 tones of soya in the next seven years in Zimbabwe. Command soya bean production is definitely the way to go.
Skewed systems
As the private sector, we are pushing for finalisation of the National Trade Policy. We saw noble policy interventions such as Statutory Instrument 64 being abused.
As business, we were supposed to do a proper audit or progress check regarding the impact of SI64. Some of the products which were put on the list could not be produced in significant quantities and this either created shortages or, at worst, a link or opportunity for smuggling. With SI122 in place, we continue seeing second-hand clothing at “Copacabana”, Mbare, Sakubva, Kudzanai Bus Terminus and many other places.
It cannot be business as usual as we continue to ignore such nefarious activities.
Lack of thorough research by both Government and the private sector created some of the shortages, hence recent price hikes. About five bodies govern the beef industry: the Department of Livestock and Veterinary Services; Rural District Councils; Agricultural Marketing Authority; Zimbabwe Republic Police; Environmental Management Agency and Ministry of Health and Child Care.
These Government departments are supposed to assist in developing the beef industry, but to the contrary, these have increased administration costs because of duplicate fees. In the end, all costs are passed on to the consumer and this ultimately raises the cost of meat. A one-stop shop for all processes required in the beef industry should be introduced.
Way forward
As ZNCC, we are of the view that price controls cannot be an option whatsoever given the number of corporate tombstones we witnessed; notably during the price slash campaign of 2005. Such controls are not only limited to the goods market, but also currency markets given how Zimbabwe experienced acute foreign currency shortages when the then RBZ Governor, Dr Gideon Gono, began to fix the Zimdollar exchange rate to the greenback.
As espoused by President Emmerson Mnangagwa, we must allow market economy and enterprise to thrive and this can only take place without interventions to monitor prices. In the same vein, the Competition and Tariff Commission must be on alert to monitor price-fixing behaviour at this hour given the insatiable appetite by a number of market players to erode consumer surplus.
The message also extends to the RBZ where the bond note rate must be allowed to float than maintain parity with the greenback which we know is not sustainable. The price-monitoring function must not be a preserve of the National Competitiveness Commission. This will deepen buy-in from all the players.
Again, this can free the tension and mistrust associated with any investigation or monitoring exercise. In addition, given that the Commission’s predecessor is the National Incomes and Pricing Commission, it will be wise to try to ring-fence the new body’s role to purely competitive matters without extending a hand on pricing issues.
The legacy of the NIPC is damaging and our recommendation is for the NCC to avoid appearing like they are taking such a path because perception is reality.
On the beef industry, we feel the Ministry of Agriculture, Lands and Resettlement should consider crafting a Beef Industry Policy which governs the entire cattle value chain.
The policy should, amongst others, incorporate the following:
l Direct and regulate the industry’s operations;
l Streamline the various regulatory costs paid in the sector;
l Focus on compliance encouragement and multi-stakeholder involvement to ensure the viability of the industry;
l Clearly articulate how the regulating departments should interoperate; and
l Establishment of the one-stop-shop concept for various registrations, payment of fees and levies to lessen the burden on value chain players.
There is need for extensive farmer training programmes at district level so that farmers will be equipped with animal husbandry knowledge. This can be a better solution given the prevailing economic situation where government is constrained to recruit additional staff. Government should consider allowing private sector and NGOs to participate in foot-and-mouth disease controls (vaccines and education).
There is need for a downward review of the land tax for cattle farmers from the current US$5.
Generally, there is need for increased Government support in cattle production through pasture development, CSC resuscitation and re-engagement with the EU for market access.
o See also B3
Mr Christopher Mugaga is the Zimbabwe National Chamber of Commerce CEO. He shared these views with The Sunday Mail’s Lisa Mandewo in Harare last week
