Bread price increase unjustified: Biti

Finance minister Tendai Biti has described recent bread price increases  as unjustified, while the Competition and Tariff Commission (CTC) has begun investigations into possible price fixing by bread industry players.

Bread producers two weeks ago announced at a press conference that they were increasing prices in response to the decision by Russia — one of the world’s biggest exporter of wheat — to limit exports of the cereal to avert domestic shortfalls.
The National Bakers Association of Zimbabwe (NBA) agreed to increase bread prices by 10%, with the price for a loaf increasing to between 90 US cents and US$1, 10, sparking widespread condemnation.
But government and other players are questioning the producers’ decision to make uniform increases, arguing that this could result in a bread cartel whose influence could spread to other sectors of the economy if left unchecked.
“We have traditionally imported wheat from South Africa, which was not in any way affected by developments in Russia,” Biti told the Zimbabwe Independent.
“If millers and bakers cite this scenario for their price reviews, they are being dishonest… It is no longer the hyperinflationary era of 2008 where you just dream of a new price the next day. Shareholders would be happy with a 8%, 10% or 15% increase not over 70%,” Biti said, equating millers and bakers’ behaviour to the black market foreign currency dealings phenomenon that characterised the economy in 2008.
The CTC, which began investigations last week, said it was taking the matter seriously.
“The media has been accusing us of doing nothing when in actual fact we are still carrying out investigations as it is a serious matter. We will take the approach we did with Zesa (on electricity tariffs),” said the CTC in a response to inquiries from the Zimbabwe Independent. The National Incomes and Pricing Commission (NIPC), the country’s prices regulator, has said it has also opened investigations into possible collusion.
Zimbabwean businesses, market observers say, are quick to review prices upwards whenever there is a movement on the international market, but adopt a “see no evil, hear no evil standard when the opposite happens”.
The behaviour by bread producers had left the misleading impression that bakers and millers in the country had similar production costs with Russia and the rest of Europe and North Africa, they said.
“When the situation stabilises in Russia, people will expect the price to go down and this should apply to all like-minded entrepreneurs,” said an economist who did not want to be named, adding that the move to uniformly increase bread prices raised fears about the return of industry cartels.
Recently, the CTC ordered state power firm Zesa Holdings to desist from abusing its monopoly to overcharge consumers after widespread complaints that Zesa was charging exorbitantly for an erratic service.
Since 1998 when the Competition Act (Chapter 14:28)  came into effect, the CTC involvement in regulating competition and unfair trade practices was largely restricted to mergers and takeovers, an area that the ordinary person had very little interest in.
Analysts say a standard loaf of bread, priced at US$1, 10, will effectively cost US$2 because most retailers do not have coins to use for change, forcing consumers to choose between a box of matches, sweets, bubble gums or candles readily available at tills in lieu of the 90c change.
A cost build up study done by the Consumer Council of Zimbabwe last year showed that bread was supposed to cost between 85 US cents and 95 US cents but was priced at US$1 to avert the attendant headaches associated with small denominations in the economy. Analysts say this makes the US$1,10 currently being charged after the price increases unjustifiable.
In neighbouring South Africa, where the bulk of local players source their wheat from, a loaf of bread costs between 7-9 rands (an average of 90 US cents).
In US dollar terms, a standard loaf in Namibia costs 85 US cents, Botswana 90 US cents and Zambia 89 US cents. In Mozambique, fatal bread riots only ended on Wednesday after the government agreed to scrap a 25% increase that would have resulted in the price of a bread roll, that country’s bread staple, going up to 20 US cents.
Consumer Council of Zimbabwe CEO Rosemary Siyachitema told the Independent on Tuesday that her organisation was working with the NIPC on research regarding the pricing of bread and other basic commodities prices.
“It (research) is a long procedure. We are liaising with NIPC, they are the ones with a statute that allows them to request invoices and receipts from retailers and manufacturers,” Siyachitema said.
Consumers this week said it seems the deep-seated mistrust between government, business and consumers has simply been inherited from the old political and economic dispensation by the new one.
“We are seeing the return of super profits. Companies should not rip us off but the bread issue shows that producers, who should in fact be competing, are colluding to increase prices,” said Shuwai Makate, an accounts clerk with a Mutare local clothing retail shop.
Biti in his mid-term fiscal policy in July this year branded sections of the business community as “economic gangsters” who cling to the profiteering mentality of old. The minister said this in the wake of price increases which were beginning to filter through the market and negatively impacting on the country’s efforts to rein in inflation.
Reserve Bank of Zimbabwe Governor Gideon Gono had earlier waded into the argument, saying that “money illusions and psychological hangovers where sellers of goods and services are taking time to appreciate the true value of hard currencies, and hence escalate prices disproportionately” would affect inflationary pressures.
The NBA and the Grain Millers Association are, however, digging in, telling the Independent this week that it was wrong for the NIPC to demand a reduction in prices without looking at the global picture.
“They (NIPC) said they are carrying out their investigations. But it is common knowledge and there is enough evidence to prove that wheat prices on the world market went up,” the NBA said.

 

Paul Nyakazeya/Benard Mpofu

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