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Price increases hit struggling consumers

IF an old gypsy lady gazed into her crystal ball and proclaimed to Zimbabwean consumers that the latest in a series of government economic initiatives and retailer pricing models would transform their lives for the better in December this year none would believe her.

Even if the gypsy allowed them to take that rare glimpse into her crystal ball, and they saw the slightest of evidence for themselves, they would still have severe doubts. The odds are heavily tilted against any optimism for Zimbabwean consumers.
Many Zimbabweans have every reason to doubt the “unjustified” price increases they are enduring could be remedied by profiteering retailers and shops and a crop of politicians that firmly hug populist, yet calamitous economic programmes.
They have become used to an administration with a long history of maintaining its record of disappointing deliveries.
If National Incomes and Pricing Commission chairman Godwills Masimirembwa is called to monitor prices in a dollarised economy will he make a difference after failing to significantly do so during the Zimbabwe dollar era?
Masimirembwa’s role is to compare prices of goods and services in the region and ensure that the charges are applicable in Zimbabwe.
But what is the reason for the sudden rise in prices of goods and services?
Could it be the country’s trade rebate structure, firming of the rand, taxes, response to speculation or  is it sheer profiteering? Why has the Retail Association of Zimbabwe ignored the price trends or do they still exist?
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.
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.
The country’s three biggest supermarkets — OK Zimbabwe, TM and Spar — are said to have increased their average price for a basket of goods by about 15% during the fourth quarter of the year.
Experts say 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 despite the issues of supply and demand in the equation.
The price of two litres of cooking oil has increased to US$3,70 this week from US$2,90 in January, while a 10 kg bag of mealie meal rose to US$6,90 from US$4,80.
A kg of tomatoes now costs US$3 from US$1,80. A kg of economy beef is being sold for US$3,90, up from US$3,00 while two litres of cool drink concentrate Mazoe now cost US$3,10 from US$2,70. A bar of washing soap is US$1,20 from US0,90c.
The cost of living as measured by the consumer basket went up by US$7, 40 in October on the back of speculative tendencies by the country’s retailers.
The low income urban earner monthly basket for a family of six rose to US$491,28 from US$483,88 in October, reflecting a 0,02% increase.
Consumer Council of Zimbabwe (CCZ) executive director Rosemary Siyachitema said the rise was driven by local retailers seeking to capitalise on the upcoming festive season.
“CCZ is concerned that the increase in the food basket may be attributed to the traditional behaviour of supermarkets to increase prices towards the festive season and also take advantage of that little bonus workers will receive in November,” she said.
Economist Brains Muchemwa, however, said the anticipated bonus for civil servants was not the reason behind the price hike saying the retail trade in Zimbabwe was now competitive to an extent where retailers 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 food basket increased by 0,06% to US$136,76 in October 2010 from US$129,56. Similarly, the food and detergents basket was on an upward trend moving from US$139,88 in September to US$147,28 in October, reflecting a 0,05% increase.
Economist David Mupamhadzi told businessdigest that the increase in the price of basic goods was largely attributed to the strengthening of the South African rand, which pushes up the costs of imported basic goods and services.
“The majority of the goods and services in the country are imported from South Africa, and movement of the rand will have a big impact on the prices of imported goods and services,” he said.
He said given that capacity utilisation in the country was still below 50%, it followed that Zimbabwe will continue relying on imports mainly from South Africa, and the movement of the rand will continue to influence prices in Zimbabwe.
“The high cost of utilities in the country is also pushing prices of basic goods and services. The continued increase in the price of water, rates, and electricity was increasing the cost of production to companies, and hence the increases in the price of basic goods and services,” Mupamhadzi said. “Industries in Zimbabwe are facing a number of structural rigidities which pushes up the cost of production per unit. However, it should be noted that the price trends that the economy recorded in 2010 is consistent with a dollarised economy, and even the average inflation in the region.”
He said what was critical is to focus on enhancing productivity in the key sectors of the economy to improve the supply side situation.
“There is need to reduce the overreliance on imports through improving local production,” Mupamhadzi said.


Paul Nyakazeya

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