Eric Bloch Column

Double standards on curbing inflation

WITH ever greater frequency, government is demonstrating its policy: “Don’t Do As I Do, Do As I Say!”

Whilst Zimbabwe has, almost endlessly over the last seven years, suffered the intense pangs o

f hyperinflation, the media controlled by the state has vigorously and repeatedly given great prominence to the innumerable endeavours of government’s spokesmen to berate the totality of commerce and industry for the supposed causes of that inflation.

The recipients of the never-ending, scathing abuse of government have been profusely castigated for alleged profiteering, inhumanely bringing poverty to the masses and for creating the inflation that has been a pivotal cog in the decimation of the economy, and repeatedly blamed for breaching non-existent price controls.

With very great frequency, ministers, permanent secretaries and others within the corridors of government have threatened diverse sanctions against private enterprise that increase prices without governmental approval, notwithstanding that most of previously-legislated price controls were abolished.

Then, approximately two weeks ago, the Ministry of Industry and International Trade announced that it had reached agreement with the manufacturing and distributive sectors on price increases for a variety of basic commodities, including bread (from $4 500 to $7 500 per loaf), cooking oil (from $8 100 to $22 200 for 375ml bottle), 2kg white sugar (from $8 300 to $14 500) milk (to $8 500 for 500 ml and $16 600 for a litre).

On average, the increases approximated 174%, and were determined after extensive consultations between government and the private sector.

However, whilst government is usually rigorously opposed to price increases by commerce and industry unless they are lower than the rate of inflation, and have been determined after very extensive consultation, the same criteria do not apply to government, and to its “commercial” operations through its parastatals.

It usually effects increases of its prices, and charges for its services, willy-nilly, in disregard for the inflationary consequences, and for the repercussions of that inflation, and without any prior dialogue with consumers or with consumer representative bodies.

The examples of those actions by government and by the parastatal enterprises controlled by it, are very many, clearly evidencing that it does not practice that which it preaches.

In the year ended June, wherein the Consumer Price Index (CPI) based rate of inflation was 164,3%, postal charges rose by 4 641,5%, being more than 28 times the annual rate of inflation!

In the month of June, those charges rose by 309,3%, whereas the month-on-month rate of inflation was 18,1%. Even accepting that Zimpost is, to some extent, impacted upon by movements in foreign exchange rates, and that it had been subjected to some very significant wage increases, it appears to be incomprehensible that postal charges should escalate with such immense magnitude. That is even more particularly so as it appears that increasingly the reliability of mail delivery is declining in inverse proportion to the soaring charges.

Prices of state-controlled newspapers have increased by more than twice the rate of inflation. Undoubtedly such increases were necessary, in the light of surging cost increases of newsprint and ink, and of wage increases. But many in the private sector can equally justify their need for price increases in excess of the rate of inflation.

Such justifications are invariably ridiculed and ignored by the government, which is motivated only by showing consumers that government is caring in the extreme, striving to protect them (even if in so doing businesses are forced into closure, causing unemployment and product scarcities).

Amongst some of the most radical of governmental increases in charges are those gazetted on August 4 in respect of services of the Registrar of Companies. The minimum cost of registering a new company rose by 400%, whilst the minimum fee payable for lodgement of a company’s annual return rose fro $5 000 to $60 000, being an increased charge of $55 000, or an additional eleven times the previously payable fee.

Admittedly, some time has elapsed since the previous increase in fees, but nevertheless the new fee levels are so great as to provoke a sense of shock. Not only is the extent of increase, in one fell swoop, untenable in the light of government’s attitude to proportioning lesser price increases in the private sector but, in addition, the new scale of charges is likely to discourage many first-time entrepreneurs utilising corporate structures, and will instead motivate them to operate within the informal sector,

Over the last year, Air Zimbabwe has increased most of its fares by more than 500%. Again, it has to be accepted that a high element of its costs are foreign currency based, including aviation fuel, spares, major aircraft services, foreign landing fees and services, and much else.

However, in a year in which foreign exchange rates have moved by less than 300%, the airfares have risen considerably more and that despite that airline’s recent many proud statements that its newly acquired aircraft are very greatly more cost effective than its older fleet of larger aircraft, and despite its lesser service to its passengers on those routes where it has the monopoly. Its fares go up almost as frequently as do its aircraft!

Allied to the immense increase in costs of flying with Air Zimbabwe is the inexplicable disparity in the airport departure taxes levied by the Civil Aviation Authority of Zimbabwe (CAAZ). If the flight is to a destination within Zimbabwe, the departure tax is $90 000, but if it is to a destination outside Zimbabwe, a resident has to pay a departure tax equivalent to US$30, presently fixed by CAAZ at $530 000.

Why does it cost $440 000 more to provide the services of an air terminal, runway take-off facilities, and support services, if the flight is proceeding to another country, than if it is going to another airfield within Zimbabwe? (The only evident differential is that some air terminal space has to be made available to Immigration and Customs officials!) This gargantuan differential smacks of being yet another governmental “rip-off” of the captive customer.

The saga of government’s rampant stimulation of inflation, as distinct from its ongoing attribution of blame to the private sector, does not begin and end with Zimpost, Zimpapers, the Registrar of Companies, Air Zimbabwe and CAAZ.

Tel*One is equally guilty of increased charges at rates very considerably greater than the rate of inflation. That is understandable insofar as regional and international telecommunications are concerned, in the light of the depreciation of the Zimbabwean dollar, but not credibly explainable in the case of local and national calls. In like manner, the mammoth increases which have been inflicted upon electricity consumers by the Zimbabwe Electricity Supply Authority (Zesa) make inflation-related price increases seem insignificant.

So too have been the increases in charges by the state-owned hospitals. It is undeniable that their costs have risen very considerably (even if they still under-reward doctors, nurses and other medical personnel, motivating ever more to seek employment outside Zimbabwe).

However, in an economic environment where almost four-fifths of the population exist below the poverty datum line, its is humanly and socially- unacceptable to price essential health services beyond the grasp of the majority.

As government must, (in order to contain inflation, and in order to restore national and international fiscal credibility), contain its spending, it should cut back on defence spending, and much other spending of lesser priority than health. Instead, it raises its charges to a stressed, increasingly unhealthy, population.

But the must recent piece-de-résistance of government’s stimulation of inflation, and of placing essentials beyond the means of the populace, has been the vicious, pernicious imposition of a 1000% in school fees, with retrospective effect from January.

Last year the Minister of Education Aeneas Chigwidere, forced the temporary closure of 45 private schools for fee increases for lesser in extent, which he had not been prepared to approve, and is currently pressing for the promulgation of far-reaching, disastrous amendments to the Education Act, likely to bring about an end to all private schooling in Zimbabwe.

Whilst he would vigorously protest to the contrary, few believe that there are any motives to his actions other than to seek revenge for the private schools defeating him in the courts, and to wholly subjugate the private schools to his desired omnipotent power. And yet, at the same time, he inflicts fee increases so great that tens of thousands are having to forfeit education, and many more are relocating to rural areas where some school fees are somewhat less.

Government’s stance is evident, being that of double standards. It is that necessary, survival, price increases of the private sector must be vociferously condemned, and the private sector blamed or inflation. It is that government and its parastatals are immune from any need to contain their prices and charges increases, but that those increases can be effected irrespective of extent, irrespective of consequences, and oblivious to the impacts upon society as a whole, and upon the economy.