A WAVE of price increases of basic commodities and groceries that has sparked public outrage in recent days was triggered by a combination of factors, including foreign currency shortages and the parasitic tendencies of business operators ahead of the festive season, the Zimbabwe Independent has learnt.
By Tinashe Kairiza
The price of bread shot up by 10% from US$1 to US$1,10 before an outcry by consumers forced bakeries to revert to the prior price, after consultations with government and business representatives.
But as government restored bread to its initial price benchmark, inflation this week quickened to 2,94% while price increases of other commodities continued unabated.
A kilogramme of fresh kapenta (sardine) shot up to an average of US$14 in most retail outlets. A two-litre bottle of cooking oil has risen from US$2,80 to US$4 while the price of Boom washing powder increased from US$0,50 to US$0,80. A crate of eggs has risen from about US$4,50 to around US$7.
The price of meat also rose up sharply, with a kilogramme of beef and chicken now going for as much as US$10 and US$14 respectively. A 2kg packet of rice has risen from US$2,85 to US$3,30.
The Livestock Industry and Meat Advisory Council (LMAC) last month anticipated an increase in the price of beef and chicken after government introduced a 10% levy through Statutory Instrument (SI) 129 stipulating industry players to pay US$10 of the value of a fifth quarter per animal slaughtered. Under the instrument, milk producers are being charged US$0.1 per litre, the same charge levied for every day-old chick produced.
“The Livestock and Meat Advisory Council has already approached the Ministry of Agriculture, Mechanisation and Irrigation Development through the deputy minister responsible for livestock to consider a freeze in the implementation of the SI to allow for intensive stakeholder consultations towards a livestock development fund whose terms are agreeable to beef, dairy and poultry farmers, industry and government,” LMAC said in November.
Confederation of Zimbabwe Retailers Association president Denford Mutashu attributed the rapid rise in commodity prices to the debilitating foreign currency crisis crippling the country. He said in some cases the increases could also be attributed to profiteering. “The wave of price increases on the market has been necessitated by shortages of foreign currency and cost build-up on one hand while there are also evident speculative nefarious tendencies by some unappreciative business players bent on causing unnecessary panic,” Mutashu said.
“Most businesses have engaged in secondary business of selling cash without banking it instead of focussing on their core business. I have tried to check in the region but failed to get a country that sells kapenta for more than US$18/kg. It also seems as if Zimbabwean cattle and chickens are farmed in Jupiter or Mars.”
The introduction of Statutory Instrument (SI) 64 restricting the importation of goods to protect the local manufacturing industry, Mutashu said, had also triggered an increase in commodity prices.
He said while the protectionist legislation had helped cushion the local manufacturing industry from competing with an influx of cheap imports, prices of locally manufactured products had shot up steeply.
“SI 64 requires a careful and balanced consideration of the benefits and downsides. From industry’s perspective, the instrument helped many industries that had closed down to resuscitate as evidenced by an increase in capacity utilisation and production,” he said.
“However, the instrument pushed the demand for foreign currency upwards yet the commodity has always been scarce, hence allocations from RBZ.”
Earlier this year, a concept note prepared by the Hospitality Association of Zimbabwe (HAZ) on the impact of SI 64 on the industry pricing regime revealed that prices of goods and services shot up the after the introduction of the legislation. According to the concept note, which is in the possession of the Zimbabwe Independent, the price of imported Castle Lite lager rose by 15,24% from US$24,99 per crate to US$28,80. The price of a crate of Windhoek Draught beer rose by 23,10% from US$26,40 to US$32,50. A litre of pure juice also increased by 5,92% from US$1,35 to US$1,43. The price of a box of 425 grammes sliced peaches has shot up by 42,54% from $1,74 to US$2,48. Sliced mangoes canned in 425grammes bottles have risen by 29,94% from US$1,87 to US$2,43.
Confederation of Zimbabwe Industries (CZI) president Sifelani Jabangwe said prices had sharply spiraled due to an acute shortage of foreign currency on the domestic market. He said even in the absence of legislation restricting imports, prices of basic commodities “would have still gone up”.
“Price increases for imported products have gone up by 100%. Locally produced products have gone up by about 30%.
“It is the foreign currency shortages causing an increase in prices. That is the root cause. Even without SI64, prices would still have gone up,” Jabangwe said.
Economic analyst Luxon Zembe said the recent wave of price increases was triggered by a raft of factors ranging from high production costs and the uncertainty surrounding the local business environment.
He also attributed the shortages of basic commodities on the local market to SI64.
“Price increases were triggered by push factors such as the cost of money on the parallel market, uncertainty in business environment and high cost of doing business,” Zembe said. “Some of the factors also include the speculative behaviour on the part of business, shortage of essential inputs, shortage of goods under the control regime and the profiteering behaviour of business.”