By responding to developments in Russia, where about a third of that country’s wheat crop was wiped out by the worst drought in a century, Zimbabwean millers and bakers have illustrated that Zimbabwe does not exist in a vacuum, but conforms to international trends, contrary to the “let me keep my Zimbabwe” mantra.
Russia, the major exporter of the grain, is selling only limited quantities to prevent inflation and ensure supplies for its citizens and livestock. The ban and drought in the neighbouring Black Sea region countries, Ukraine and Kazakhstan, sent wheat prices to a two-year high of nearly US$8 a bushel, from just about US$4,50 in early June. The drought is a temporary phenomenon whose end should see the prices easing, in a normal economy.
However, the behaviour of the bakers and millers fell short of international standards when they seemed to mimic the dreaded and despised price cartels that have in the past been accused of influencing increases in prices of basic commodities, which invariably play a big role in pushing up the food price index, one of the indicators in determining inflation.
By ganging up against consumers to announce the bread price increase, players in the industry exhibited some kind of oligopoly that is not acceptable in liberalised economies where business entities are supposed to compete. Their behaviour gives the impression that bakers and millers in the country have similar production costs and therefore an increase in the price of flour justifies connivance. It is common cause that business executives are able to manipulate their cost structures so that they remain on top of the game in the dog-eat-dog world of business.
Although the National Incomes and Pricing Commission has already raised concern about the possible manipulation of the effects of the Russian factor, it is surprising that the Competition and Tariffs Commission has said nothing on the issue. Although the commission has done a good job on entities such as Zesa, which stood accused of fleecing its customers, it should act swiftly in investigating such bread-and-butter issues as this oligopoly. If indeed it was necessary to increase the price, consumers should have seen a struggle for market domination through the implementation of different cost structures.
If the competition commission does not send a clear message to the business community, this trend is likely to be repeated in other sectors such as those dealing in oil products, where the price fluctuates. It is the duty of these commissions to protect the public from abuse and ensure that where business people use international events to justify price increases, the same should apply when the international prices drop. Zimbabweans will not forget that bakers used the Russian drought as an excuse for increasing prices. When the situation stabilises in Russia, they will expect the price to go down and this should apply to all like-minded entrepreneurs.