HomeBusiness DigestPrice increases need to be explained –– analysts

Afre poised for recovery

WHERE is the National Incomes and Pricing Commission chairman Goodwill Masimirembwa when you need him?

Masimirembwa’s role is to compare prices of goods and services in the region and ensure that the charges were applicable in Zimbabwe.

Low income families have spent an extra US$25 a month between January and February after a 20,5% surge in the price of basic goods, according to the Consumer Council of Zimbabwe (CCZ).

A two-week survey by businessdigest revealed that most retail outlets across the country have increased the prices of both locally-manufactured and imported basic commodities.

Sanitary pads are the only items that witnessed a decline during the period under review. Retailing is a low-margin, high-volume game.

The priority for supermarkets is to get the appropriate stock on and off their shelves as fast as possible and increasing prices is not part of the game.

Experts said the rate of food price inflation was making life increasingly difficult for the millions of families already struggling to make ends meet under the weight of rising rentals, energy costs, taxes, interest rates and school fees.

Some experts are suggesting that retail prices are rising even faster than wholesale ones despite the issues of supply and demand in the equation.

The price of two litres of cooking oil has increased to US$3,10 this week from US$2,90 in January, while a 10 kg bag of mealie meal rose to US$5,80 from US$4,80.

A kg of tomatoes now costs US$1 from US$0,80. A kg of economy beef is being sold for US$3,50 from US$3,00 while two litres of cool drink concentrate Mazoe now cost US$3,10 from US$2,70.
But what is the reason for the sudden rise of goods and services?

Could it be the country’s trade rebate structure, firming of the rand, taxes, response to speculation or it is sheer profiteering? Why has the Retail Association of Zimbabwe ignored the price trends or do they still exist?

CCZ executive director, Rosemary Siyachitema, attributed the increase in prices of basic commodities to speculative behaviour on the part of the retailers.

“We concluded that the increase for January was caused by speculative purposes on the part of the retailers as they thought that civil servants would get a massive salary increment, which was never to be,” Siyachitema said.  “We have witnessed an increase in the prices of basic commodities, the increases are marginal but they build up with time to become significant increases.”

Commenting on the implication of a bad agricultural season on the pricing of commodities, Siyachitema said it would lead to an increase in the prices of all basic commodities.

“If there is a bad agricultural season, chances are that we will witness an increase in the prices of basic commodities,” she said.

Ironically in other sectors, where competition is less intense, prices are more stable.

The country’s three biggest supermarkets – OK Zimbabwe, TM and Spar — increased their average price for a basket of goods by about 15% during the period under review.

Economist Brains Muchemwa however said the anticipated increase in the salaries of civil servants was not the reason behind the increase saying “the retail trade in Zimbabwe was now competitive to such an extent that one can price themselves out of the market”.

“This business is price sensitive and shop owners cannot independently set prices. It must have something to do with cost build up otherwise it’s not justified,” Muchemwa said.

The price of fuel, which is a major driver of the movement of prices of goods and services, has however stabilised since the second week of January fluctuating at between US$1,20 and US1,36. Diesel is being sold for between US1,05  and US$1,10.

Economist David Mupamhadzi said: “Reducing imports could make a difference since transport costs are high. With parity pricing they (local producers) can compete on quality.”

In one of his weekly columns, economist Eric Bloch said retail outlets needed to explain to consumers why prices of goods had gone up when major inflation drivers had been stable for a long time.

Economist John Robertson said some of the more recent price rises were not justified.
“The rand has been pretty stable against the US dollar for several months so imported raw materials or packaging should have remained constant,” he said.

Year-on-year inflation rose by 2,9 percentage points on the December rate of -7,7% to -4,8% in January, the Central Statistical Office (CSO) said last week.

From January to December 2009, month-on-month inflation had been oscillating between -3,1% and 1 percent after government dollarised the economy.

 

Paul Nyakazeya

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