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The Eric Bloch Column

The Eric Bloch Column

Sauce for the goose and the gander
By Eric Bloch

WITH inflation again

surging upwards, concurrently with ever greater numbers in Zimbabwe becoming unemployed, the hardships afflicting the Zimbabwean population are intensifying exponentially. 

Whilst there are numerous causes of those hardships, the most pronounced is undoubtedly hyperinflation.  It is so great that more than 80% of the populace are battling to survive on incomes below the Poverty Datum Line (PDL), and more than half of that populace suffers under-nourishment and malnutrition as their incomes are lower than the Food Datum Line (FDL).

As the adversities increase, government and the Consumer Council of Zimbabwe (CCZ), and the state-controlled media, strive vigorously to identify appropriate scapegoats upon whom they can attribute blame for the runaway inflation.  

Unhesitatingly, they point their accusatory fingers at private sector enterprise.   

They repeatedly allege that Zimbabwean industry is exploitationist and engaged in endless profiteering.  Similarly, they attack the wholesalers and retailers with like allegations.

However, they demonstrate a remarkable rectitude when parastatals and other arms of government increase their charges.  They spew forth vitriol against manufacturers who raise prices for their products,   and are scathing about price reviews effected by retailers.   Whensoever any prices increase,   the CCZ demands implementation of comprehensive  price controls,   disregarding that such controls invariably result  in product shortages,   unavoidable  closures of business (with  consequential further unemployment,  and loss of downstream economic activity),  and fuel black  market  trading, resulting  in even greater inflation.  But they remain silent when parastatals raise their charges, and are similarly voiceless when government raises taxes or increases other imposts.

And yet, not only are those parastatal charges and governmental dues major direct contributants to inflation, they indirectly fuel yet further inflation as private sector enterprises have no option but to revise prices upwards in order to fund the  increases in their operating costs imposed by the parastatals and by government.     

Last month, Zesa revised many of its tariffs by as much as 73% in some instances, and then only last week it announced that further increases (approved by the regulatory authority) will be effected during the next month,   by up to a further 200%.

Tel*One and Net*One have raised their charges during the last two months, in many instances by 200%, and Zimpost has done likewise.   In less than a year, the Airport departure tax charged by the Civil Aviation Authority of Zimbabwe (CAAZ) has risen more than four-fold.  So too have many of the charges of the Department of National Parks and Wildlife Management, very negatively impacting upon Zimbabwe’s greatly stressed tourism industry. 

The state-controlled press has (in common with the independent press) increased prices at least three times in the last six months.  Almost all,   if not all,   other parastatals have done likewise.

In reality, parastatals must as unavoidably increase prices and charges as applies to the private sector, for they are impacted upon by the ravages of inflation as greatly as are the private sector industries and businesses.  

They too have to give salary and wage increases,   access foreign currency at changing rates of exchange,   and pay more for their operational inputs.   But in an endeavour to deflect blame for the inflationary environment from itself,   government focuses its accusatory bile upon the private sector, disregarding that its enterprises are doing the same that it finds distasteful and unacceptable in the private sector.  And government’s behaviour in regard to the unavoidable price increases of commerce and industry  is aligned with repeated, spurious allegations against any business that discontinues operations.   Regularly, after such occurrences, government contends that the sole motivation of closure of the business will have been to undermine the economy and disable the government. 

The mind boggles at the thought that private enterprise can be so desirous of destroying the economy, and of disabling government, that it will commit suicide, and subject owners to immense losses and poverty.  But ministers in government recurrently claim that the closed businesses did not need to close, and “threaten” that it will expropriate any such businesses.

In practice, there is only one significant difference in the operational modes of the private sector and the parastatals.  That is that the former, driven by the impacts of competition,   seeks to minimise price increases by maximising productivity as far as it is able to do so, and by increasing production efficiencies and overhead controls.  

In contradistinction,   many of the parastatals have very little regard for such measures, and steadfastly resort to price increases to cover their rising costs.  

However,   that does not deter government or the CCZ from castigating the private sector, whilst refraining from any comment, let alone criticism, of the public sector enterprises. Very evidently, they do not accept the longstanding maxim that that which is sauce for the goose, must also be sauce for the gander.

The only body to have acknowledged that the public sector enterprises are, in the main, ineffectually operated, and are millstones around the neck of the economy, is the Reserve Bank of Zimbabwe (RBZ). 

In a supplement to the Fourth Quarter 2005  Monetary Policy  Review Statement,  the RBZ contends that “the major  challenge facing the parastatals….has been  lax corporate governance practices, characterised by lack of transparency and  meaningful capital investment, weak financial  controls and systems, poor policy guidance, implementation,  and business culture, failure to produce audited financial  statements, and inadequate staffing levels”.

The supplement continues with some very telling and damning observations, including:

* High staff turnover, and low staff morale; and

* Board members/councillors, who are political appointees, have tended to lack certain necessary technical expertise required for prudent policy making; and most of them “are into entities to pursue their own political and self-interest and may not necessarily add any value to the running of the entities”.

Management of debt is poor, as evidenced by huge mismatches between creditors and debtors.

A particularly relevant comment by the RBZ was that “if local authorities (and, by implication, parastatals) cover up for their inefficiencies by hiking tariffs,   this will impact negatively on inflation”. 

The RBZ emphasised the need “to underscore the inextricable link between parastatals and local authorities and inflation”, and stated that “a buoyant parastatal and local authorities sector will dampen inflationary pressure”.

Instead of berating Zimbabwean industry and the distributive sector,   government needs to assist and facilitate attaining greater operational efficiencies and enhanced utilisation of productive capacity concurrently with sorting out the morass that is the characteristic of many of the parastatals, and create measures to stimulate competition.

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