A HARARE bakery is challenging the constitutionality of price controls in a test case that could put government’s ad hoc pricing regulations in jeopardy.
A local lawyer, Addington Chinake, is representing Stephen Mapinyi and Pardon Magodhlo, employees of the bakery who were arrested in July on allegations of selling bread above the gazetted price.
The two appeared in court last month to answer charges of violating price controls. At the hearing, Chinake questioned the constitutionality of the legislation under which the two were being charged. The court will next week decide on whether or not the matter should be referred to the Supreme Court.
Since the introduction of price controls two years ago the government has fined a number of firms for violating price controls. A major sugar supplier was recently fined $20 million for selling sugar above the controlled price.
Commuter omnibus operators have also been fined for overcharg-ing while Comoil had 35 000 litres of fuel confiscated by the state because the company was selling it above the gazetted prices.
Bakeries have however been targeted most with four of them being fined a total of $20 million each in July. The country’s largest milk producer, Dairibord, was also fined for overcharging and reducing the size of packaging for milk.
Despite protestations from business leaders, and an admission by Finance minister Hebert Murerwa that price controls were hurting industry, the government has not relented.
Chinake will argue that the Control of Goods (Price Control) Regulations 2001 are ultra vires Section 16 of the Constitution and the Companies Act.
Section 16 of the Constitution protects citizens from deprivation of property, which includes economic rights.
Chinake will raise the point that it is not reasonably justifiable in a democracy for a manufacturer to be compelled to produce goods and sell them at a price fixed by the state. The argument is that government does not take into account the cost of production, let alone provide for a reasonable margin of profit for the manufacturer to continue operating.
The price control regulations, it is argued, impinge on Section 189 of the Companies Act, which states that company directors will protect the interests of their employees and dependants.
In that regard, selling products below cost should be deemed not to be in the interests of the employees or their families as this will result in layoffs for many companies.
Since the introduction of price controls many companies in the manufacturing sector have been forced to lay off staff while some have closed down.