HomeBusiness DigestFirming rand cited as prices soar

Firming rand cited as prices soar

PRICES of basic commodities have spiralled by about 14% since January owing to the firming of the South African rand against the US dollar while a surge of crude oil on the world market in the last quarter of the year has also not helped contain production costs.

According to a survey by businessdigest, prices of cooking oil, tooth paste, mealie meal, sugar, flour, and other basics rose significantly in December.
The price of two litres of cooking oil rose from US$2,75 to US$4,30 on Monday, Blue bar washing soap rose from US$1 to US$1,40 during the same period while a one kg of economy beef rose to US$5 from US$3,50 in January.
Commenting about the recent price increase, Consumer Council of Zimbabwe executive director Roselyn Siyachitema said most of the increases were a result of speculation and “where not justified”.
“CCZ is concerned that the increase in the foodbasket is attributed to the traditional behaviour of supermarkets to increase prices towards the festive season and also take advantage of that little bonus workers will receive in November, a behaviour which CCZ abhors. Some of the increases are not justified,” she said.
The consumer watchdog is, however, accused of not doing anything to protect the consumers since dollarisation.
Economic analyst Farayi Dyirakumunda believes the recent increase in retail prices was largely a result of exchange rate dynamics and strong demand traditionally associated with the festive season.
He said: “The recent appreciation of the South African rand to levels of around R6,8:1US$ in recent months from previous levels of around R10:1US$ would translate to an increase of US dollar prices of goods and services imported in rand from South Africa.”
He said most of the consumer groceries being imported from South Africa had therefore seen an increase in retail prices due to such exchange rate movements.
“Price fluctuations from exchange rate volatility are unavoidable for an importer in our position and stability will eventually be achieved when local production improves,” Dyirakumunda said.
“The component of the recent price increases that is motivated by a seasonal growth in demand will correct itself after the festive season. Market forces will drive prices to equilibrium.”
The average annual increase in the price of a basket of essentials surged 14% between January 2 and December 20, a percentage analysts said was too high considering that the US dollar was a stable currency.
Premier Bank economist Obrain Ruyimbe said most of Zimbabwe’s imports came from South Africa and local pricing was in US dollars thus appreciation of the rand against the US dollar was “squeezing local operating margins and act as an impetus for upward price review”.
“In the last few months we have witnessed the US dollar losing strength against the rand. In fact, the rand reached a two and half year high against the US dollar in September, and in the ensuing period our month on month inflation trended upwards marginally, 0,1% and 0,2% in September and October respectively,” he said.
“In the same period borrowing rates have increased on average from around 12% per annum towards 15%, the fuel cost went up recently by 8%. In short, there has been some cost build up pressure behind the recent price increases.”
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.”
Economist John Robertson said some of the more recent price rises were not justified adding that some supermarkets and manufactures were profiteering as some figures show that food prices have gone up far faster than can be explained.
“Profiteering happens, there are cases where people make inappropriate margins along distribution system,” he said
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 rise of goods and services is being attributed to the firming of the rand, taxes, response to speculation and sheer profiteering.
Economist Brains Muchemwa, however, said the anticipated bonus payment was not the reason behind the price increases 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.
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.

Commodity    January    April    August    Dec
Mealie meal
10kg (pearlenta)    US7,10    US$6,30    US$6,60    US$6,66
Cooking oil 2litres    U$2,75    US$2,75    US$3,10    US$4,30
White Sugar 2kg    US$2,30    US$2,50    US$1,90    US$1,90
Rice 2kg (Mahatma    US$2,35    US$2,50    US$2,50    US2,85
Floor 2kg (Gloria)    US$1,85    US$1,85    US$2,20    US$1,99
2 litres (Mazoe)    US$2,75    US$3,00    US$2,90    US$2,75
1 kg beef (economy)    US$3,50,    US3,90    US$4,50    US$5,00
100ml colgate    US$99c    US$99    US$99c    US$1,30
100 bags (Quick brew)    US$1,50    US$1,80    US$2,00    US$2,20
Celeste tissues x4    US$1,00    US$1,20    US$1,20    US$1,55
Pro brands salt 1kg    US30c    US0,30c    US0,30    US$0,35c
Blue bar washing soap    US$1,00    US$1,05    US$1,20    US$1,40
Geisha soap    US$0,60c    US$0,60    US$0,65    US$0,69
Surf 500g    US$1,25    US$1,30    US1,50    US1,80
Milk 500ml    US$1,00    US$1,00    US$1,00    US0,90c
1 kg tomatoes    US$1,00    US$1,00    US$1,20    US$1,00
Stock magazine 500g    US$1,90    US$1,85    US$1,90    US$1,97
Total    US$33,19    US$33,89    US$35,64    US$38,61


Paul Nyakazeya

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