THE country has witnessed a massive spate of price increases of all basic commodities after the festive season, raising prospects of an implosion of the e
conomy in 2008. And worse is to come with prices likely to increase ten-fold economists say.
A survey conducted by the Zimbabwe Independent revealed this week that a new wave of price hikes reminiscent of last June which resulted in government imposing a price freeze had once again hit the country.
A two-litre bottle of cooking oil that was selling for $8 million before the festive season now costs $13 million. On Tuesday government said the gazetted price for the cooking oil was $7 million.
A loaf of bread now costs above $1,5 million, up from $700 000, while the price of a 2kg chicken has skyrocketed to about $20 million from $6 million.
A kg of beef costs above $15 million, up from $7 million. Two litres of Mazoe now cost $9,5 million, up from $3,8 million before the holiday.
The Consumer Council of Zimbabwe (CCZ) said most prices being charged were not justified.
“The rate at which prices are increasing, which are not justified, is a result of speculation by some business people who want to make quick money,” said the CCZ.
The consumer watchdog said most commodities were being charged at four or five times their cost buildup, which under the new pricing regulation was not allowed.
The National Incomes and Pricing Commission (NIPC) said the prices being charged had been approved.
“If anything is being sold in a supermarket, that means we have approved the price. We believe the prices we are approving are viable and this should see products continuing to be bought,” said NIPC chairman Godwills Masimirembwa.
Government’s decision to mandate the NIPC to approve prices of basic commodities has created serious distortions in the market as businesses battle to stay afloat.
Goods have gone up in price because of shortages caused by the NIPC’s price restrictions.
The move has also resulted in an avalanche of imported goods whose prices are being set at parallel market rates.
Surprisingly, government last week extended the lifespan of regulations governing product and service price reviews, effectively mandating NIPC to approve such reviews for the next six months.
“The extension of the Statutory Instruments shows that our principals are conscious of the fact the price distortions still exist in the economy,” Masimirembwa said.
He said stern action would be taken against businesses that index prices based on parallel market rates.
Over the past four months retailers have resorted to stocking imports to fill the void left by local producers who are not manufacturing at the controlled prices they were forced to charge by government during last year’s price blitz.
The prices of most imported goods are beyond the reach of many consumers whose wages are lower than the consumer index.
While the imports might have helped restock shops, their prices show the futility of government’s decision to control prices in the first place.
For example, while local companies like Victoria Foods are being forced to sell rice at the gazetted price of $2,5 million for 2 kg, South African brands like Tastic rice packed by Tiger Consumer sells for $10 million for the same quantity.
While the gazetted price for two litres of cooking oil is $7 million, imports are being sold for between $13,9m (Sun oil) and $15 million (Sunflow).
Analysts have said if local manufacturers resume production their goods might never match foreign products.
Economic consultant John Robertson said as the last stocks of goods trickle out of factory warehouses onto the market, the country could witness an inflationary spiral that would make today’s prices seem cheap.
“It could go much higher, 10 times as much for some things in the next couple of weeks, as goods cease to exist and imports flood the market,” Robertson said adding that the real victim will be the consumer.
ZB Financial Holdings group economist Best Doroh said local retailers were being forced to import basic commodities to fill the gap created by low capacity utilisation in the local industry.
“Consumers require these basic products and if they are not available from local manufacturers, retailers have to satisfy that need through imports,” said Doroh.