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Tetrad – Scotchcart prices: what on earth is happening?

By The Tetrad Group

THE ebullience of the stock market this week would not have surprised anyone who understands that markets are driven by information.

elvetica, sans-serif”>The particular information which caused the latest upturn in share prices was Monday’s disclosure by the Central Statistical Office (CSO) that consumer prices had risen by 359,8 percentage points in September by comparison with September 2004.

The year-on-year rate of increase jumped 94,7 percentage points compared with the August’s increase of 265,1%. The monthly rate of increase was 33,3%, the third highest in the country’s recent unfortunate hyperinflationary experience being exceeded only by the 47% in July and the 33,6% of November 2003.

The CSO remarked that the annual rise in food prices, noted for their volatility, was 308,2% while non-food prices rose 391,4%. The month-on-month increases for the two groups were 23,3% and 38,5% respectively.

Increases well above three times that of the all items monthly rate were recorded by domestic services; other transport services; telephone and telefax services; and motor cycles, with rises of 263; 234,1;125,2 and 120,8% respectively.

As the CSO spokesperson commented, by far and away the biggest rate of increase was in the price of scotchcarts which rose 1 650,3% month-on-month.

While the weighting of scotchcarts in the expenditure basket is a mere one half of 1%, the extremely sharp increase in their prices is intriguing. Could it be that the greatly increased price of fuel, or its non-availability, has led some operators to park their minibuses and purchase scotchcarts to provide a more readily available means of transport at least until the situation improves?

Or is it that the spending of large sums on boosting farming production has given rise to increased investment in rural transportation?

Or have the scotchcarts, like everything else, some indispensable, imported component, however small, the increased cost of acquiring which has resulted in a sharp jump in production costs and selling prices?

An alternative view, which would be a favourite of many in bureaucratic circles, would be that some economic saboteurs opposed to the land reform have connived to unjustifiably increase the price of scotchcarts, the normal mode of transport for A1 farmers for the transportation of their produce to the nearest road or the ferrying of the sick to hospital.

The increase can be said to have been introduced to coincide with the launch of the input scheme to limit the ability of farmers to transport inputs from the nearest GMB depots.

The zealous lot among the mandarins would go on to promise unspecified action against the country’s detractors.

The increase could also be attributed to a sudden surge in demand, probably triggered by the “unusual” availability of maize seed.

Obviously, Operation Restore Order could have abetted the quest for scotchcarts as those affected invest in some of the necessary equipment for rural life.

It may be some time before this dramatic change in the price of an important means of rural transportation is revealed. But we already know in what direction to look for the most likely answer to the question.

In an economy everything is related to everything else. Thus, if the cost of wheel bearings, wheels, or tyres – all of which have a high import content rises many hundred percent because of exchange rate depreciation, or the fact that the forex for their procurement can be obtained only at parallel market rates, or that the demand for forex, however sourced, has risen steepily compared with its supply – then all prices will adjust upwards accordingly, sooner or later.

What we also know is that the situation will not be improved by abusing the scotchcart makers, accusing their suppliers of corruption and threatening their likely sources of forex with all manner of dire penalties. All such responses will succeed only in disrupting supplies even more and driving prices even higher.

The most fruitful approach is to ascertain why things are as they are and then work, in conjunction or in collaboration with those involved, to increase forex generation and supply and encourage competition in producing and distributing scotchcarts so that overall output and sales expand while, preferably, unrelated money supply growth is curtailed at the same time.

Unless consistent and concerted national policies to this effect are implemented fairly soon, most of us, including even some of those currently riding around in the comfort of air-conditioned Japanese and German-designed vehicles, may before long be forced to endure jolting about in that old rural transport standby – the family scotchcart.

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