TENSION is rising between the business community and the National Incomes and Pricing Commission (NIPC) following the recent increase in the prices of basic commodities after the liberalisation of the foreign currency exchange rate policy.
Businesses are arguing that the NIPC is no longer relevant because the prices of basic commodities are now being decided using the exchange rate on the new interbank market.
They say that NIPC should not interfere with the pricing of basic commodities because they have no control over the exchange rate on the open market.
This week Confederation of Zimbabwe Industries president Callisto Jokonya said price controls were no longer relevant as they are hurting business and consumers as well.
“It has to be dynamic and move with the exchange rate; if the exchange rate goes up on a daily basis, prices must also change daily,” Jokonya said.
The NIPC is angry that businesses have reviewed their prices without approval.
They insist that they are still relevant in the economy because their businesses might take advantage of the situation to profiteer.
“It is unnecessary for businesspeople to effect new prices as no one has incurred the costs that they are claiming to have because banks have not started selling foreign currency,” said NIPC chairman Godwills Masimirembwa.
This week, prices of most basic goods shot up as they reacted to the new liberalised exchange rate market which was announced by the central bank two weeks ago.
For instance the price of a loaf of bread went up to $170 million from $80 million; a packet of milk now costs $160 million, up from $80 million.
For a 2kg of sugar, one has to fork out $480 million, from $48 million.
On the parallel market a 2kg packet of sugar was this week going for $600 million.
A 12kg packet of potatoes was going for $2 bliion, up from $1 billion last week.
A 2-litre bottle of fruit juice which was previously $200 million is now at $800 million.
Masimirembwa accused businesspeople of taking advantage of the new system to increase prices.
According to Masimirembwa, one company has applied to price a 2 litre bottle of cooking oil at $2 billion.
Last week, Zimbabwe National Chamber of Commerce president, Marah Hativagone, said prices would go up in response to the liberalisation of the exchange rate.
“Obviously the prices will go up, at the same time the NIPC will be breathing down our necks, it is not good for any economy,” Hativagone said.
She said inflation is likely to get to 1 000 000% soon, saying there is need for the central bank to take additional steps to correct the exchange rate before the situation gets out of hand.
A manager with a local supermarket said prices were going up with each delivery.
“Iâ€™m not sure why it has been like this but almost all our suppliers have hiked prices and likewise, we have also increased prices,” said the manager.
“We ordered ten tonnes of sugar only to be told that we have to top up the money because what we had paid is only enough to cover three tonnes.”
An economic analyst with a local merchant bank said the escalation of prices is not a new phenomenon and is not in any way related to the liberalisation of the foreign exchange rate.
He said the price hikes could be attributed to the election aftermath which saw growth in terms of money supply.
“In as much as liberalisation has taken place, it is insignificant to attribute price increases to the freeing of the exchange rate market; it can only be said so if the price increases are unprecedented of which some could have been hiked to match the product import parity.”
Businesspeople who spoke to businessdigest said though the price increases have resulted in the availability of most basics that had disappeared from the shelves, they were afraid that the NIPC might come after them or worse still a price blitz could occur.
“Goods are returning to the shelves but we are hoping that Masimirembwa does not invade our shelves because reducing the prices will result in hoarding and promotion of the parallel market,” said another supermarket manager.
Analysts said the exchange rate coupled with daily events happening within the economy was the cause of the escalating prices of basic goods and services.
“When factors affecting inflation are put into totality, it leads to expectational pricing; people tend to overdramatise their pricing system,” said Witness Chinyama, an economic analyst with Kingdom Bank.
He said due to the fact that there was less production taking place, the normal chain of manufacturer to retailer through the wholesaler had been distorted with many middlemen coming, putting their own mark up resulting in the escalation of prices.
“The depreciation of the Zimbabwean dollar against other major currencies and asset pricing inflation could be another factor contributing to the increase in prices.”
By Jeslyn Dendere