By LISA TAZVIINGA/CHIPA GONDITII
STANDARDS of living for ordinary Zimbabweans and business operations have dramatically deteriorated during President Emmerson Mnangagwa’s 15 months in office, amid tumultuous price volatility and rapid erosion of incomes, the Zimbabwe Independent can report.
Due to economic deterioration since Mnangagwa came into office after seizing power from former president Robert Mugabe through a coup 15 months ago and attempting to legitimise his usurpation via a disputed election, some prices have gone up by 400%.
Annual inflation has surged from 31,01% in November 2017 to 56,9% in January 2019 — almost doubling; the highest record in a decade. Purchasing power and aggregate demand have resultantly plunged.
Due to exchange rate movements and differentials, salaries and wages have gone down almost four times in real terms. Company balance sheets, value, stocks, pensions and savings have been badly eroded.
As purchasing power declines and local quasi-currencies lose value, consumers have been acting short-term, shopping for instance, and buying things that probably would preserve value.
A worker who earned US$500 in November 2017, now effectively gets US$142. While prices have been sharply shooting up, salaries have been plunging.
Volatility, which provides a measure of price uncertainty in the market, has been rising and companies have reacted by delaying investment and other decisions as they intensified risk management activities.
The poor have been the hardest hit by price spikes, rising inflation and eroding incomes. The situation has been exacerbated by exchange rate volatility. Zimbabweans are now languishing deeper in a sea of poverty. Zimstats figures show poverty levels in Zimbabwe have reached alarming proportions. Poverty headcount ratio at national poverty line (percentage of the population) is rising.
Over five million people in Zimbabwe are living in extreme poverty, according to World Poverty Clock.
Government’s official document, 2019-2020 Domestic and International Appeal for Assistance, says about 7,5 million people in rural and urban areas need food relief. US$1,452 billion is needed for that — US$865,6 million for rural areas and US$585,9 million for urban areas. In total, government requires US$3,2 billion from February 2019 to March 2020 in humanitarian aid.
The wave of price increases has eroded disposable incomes despite claims by the government that it is working round the clock to fix the fragile economy.
A sampling of prices of basic commodities between 2017 and 2019 shows the past 15 months have been a rollercoaster ride for the majority of Zimbabweans due to economic and market turmoil. For instance, just before Mnangagwa took over, a loaf of economy bread was selling at $0,50 (or $1 for two) mostly in high-density suburbs, while a standard loaf of bread was going for $0,90.
However, bread has since become a scarce commodity as bakers and grain millers reel from foreign currency shortages to import wheat and other key raw materials.
A standard loaf has now vanished from most shop shelves, but is retailing at RTGS$1,90, while a premium quality loaf, which makes occasional appearances on the shelves, costs RTGS$2,50.
The average interbank market rate — introduced by the central bank last week — was US$1:RTGS2,5 yesterday.
Depreciation of local quasi-currencies is making imports even more expensive, and undermining prospects of achieving a period of sustained economic growth.
The impacts of these volatile economic dynamics have hit the poor the hardest.
Prices have steadily been rising over the past 15 months. In the early months of 2018, prices remained within the pre-coup levels range. However, there were slight changes in the prices of some products, mainly those of imported items such as cooking oil, which marginally rose from around $3 for a two-litre bottle to about $4,35 in the first quarter of 2018.
After last year’s disputed July 30 general elections, prices shot through the roof; with cooking oil selling for up to $10 per two-litre bottle.
But the commodity is erratically found on the shelves of conventional retail shops; it is mostly available in the black market and shanty retail outlets where consumers have to part with no less than $12 for two litres.
A 2kg packet of white rice which sold for $1,93 around November 2017 is now selling for up to $6,49 depending on the brand. The cheapest brands such as Mariana are selling for $6, more than four times that price 15 months ago.
The price of washing powder has also sharply increased. In 2017, a 2kg packet cost about $3,15, but is now being sold for about $10 in retail outlets, more than three times the price.
Prices of the staple maize-meal have also doubled over the period, with a 10kg pack of roller meal going for $8, up from $4,29. A 1kg packet of salt which cost $0,50 now cost $1,80.
Consumers are also paying through the nose for meat after the price of standard economy beef rose steeply from $3,80 per kg to $9/kg. Premium beef such as fillets and steaks costs as much as $15/kg. Chicken is now selling at $8,89/kg, up from the pre-November 2017 price of $4,25. Breakfast cereals like Kellogg’s cornflakes were going for $2,75 for a 500-gramme pack, which now sells for $15, representing a whopping 445% increase.
The Mazoe range of cordials, including the iconic orange crush brand, just like cooking oil, has also become a scarce commodity. A 2-litre bottle, which was still going for $2,50 in major retail stores such as OK and TM, is now $8,50 on average.
At garage shops it is $10. Prices of bath soaps and detergents have also increased sharply. For example, a piece of bath soap which cost $0,55 15 months ago now sells for up to $1,99, a 261% increase.
A packet of pasta is now going for $2,50 from previous price levels of $0,59 in 2017, a staggering 324% hike. Baked beans, a common feature on the breakfast table in years gone by, is now $2,25 a can, up from as low as $0,89.
Former Confederation of Zimbabwe Industries (CZI) president Busisa Moyo said industry should brace for turbulent times as price instability is likely to persist on the local market.
Moyo told the Independent this week industry will have to readjust current prices in the aftermath of the new currency, RTGS dollar, a move likely to rattle the market within the short-term.
“The next three to four months will be somewhat turbulent as the incomes and prices explore to find a new price level in RTGS dollars,” Moyo said.
He said unless government intervenes with appropriate policies and measures to stabilise the market, turbulence would intensify.
Moyo said employers will also have to adjust salaries to cover the cost of living as labour is likely to ratchet up pressure for wage increases.
“It depends on the goodwill of all sectors, but business is prepared to play its part in ensuring adequate supply of commodities and stable prices and sensitivity to the plight of workers in light of cost pressures and demands that may come up in the next three to four months. A functional social contract will assist in supporting these measures,” Moyo said.
There is no functioning social contract between government, business and labour in Zimbabwe.
Zimbabwe Congress of Trade Unions (ZCTU) president Peter Mutasa expressed outrage over the government’s failure to address the price escalations, saying it was further impoverishing the already suffering workers and their families.
“You cannot implement national policies arbitrarily, you need a national buy-in and national ownership; a vision of where we want to take this country to, but unfortunately our government does not have one and has no social contract,” Mutasa said.
Mutasa said the 15% salary increase given to civil servants was pathetically low and would not make much of a difference given inflation levels and the erosion of salaries.
“The economy is grinding to a halt because now there is a huge mismatch between prices and the consumer basket versus the salaries of workers. For example, workers in the agricultural sector earning $85 RTGS have been given a mere 15% increase, but prices are now in reality pegged in US dollars,” he said.
“The move by companies to try and cushion workers through hardship allowances is not making a meaningful difference as some companies are giving workers $40 RTGS. Can anyone be cushioned through $40RTGS (US$11)? There is need for government to come up with serious solutions to address the root cause of the crisis which we all know, but ignore.
“We are now worse off under a President whom we all thought would change things for the better for us, but the reality is we are now worse off than we were in 2017. Isn’t it shocking that from an economic perspective bread was $0,90 and there were no fuel queues under Mugabe who had failed anyway. The consumer basket then was around $500; now it is more than $800. This is the reality we now face and live under.
“If you also look at the value of salaries in 2017, workers could still be able to get paid, come to work, pay their bills and save a little. Fast-forward to now, everything is chaotic and poverty has deepened. You cannot convince anyone that there has been a change because people are suffering more. We are disappointed by the performance of current government and something must be done to arrest this deterioration.”
Coalition of Zimbabwe Retailers chair Denford Mutashu said price increases had resulted in a ballooning average monthly consumer basket.
“The consumer basket was pegged at an average of $587 in January 2018; it moved up to $598 by September the same year before shooting up to above $650 between October and November 2018. The current wave of price increases is due to the rising cost of production vis-à-vis the availability of raw materials,” he said.
Fitch Research Company BMI says the currency crisis is fuelling inflation.
“The main determining factor in accelerating inflation, however, remains the country’s complex and unsustainable currency regime. Shortages of US dollars have led to a sharp fall in the value of bond notes and electronic dollars,” BMI noted.
Prices of locally manufactured goods have since risen sharply due to the soaring cost of production, while the volatile exchange rate has seen prices of imported commodities going well beyond the reach of many. Zimbabwe now relies on imports as its industrial base was destroyed partly by bad policies and mismanagement. Its trade deficit or current account deficit is about US$2,4 billion.
Actuarial Society of Zimbabwe president Loreen Makwanya said the volatility on the market was making it difficult to plan.
“The key challenge we have been facing is a volatile economic environment which has affected our planning and ability to implement. For example, budgets have been outpaced by increase in inflation, which means we haven’t been able to meet expenses of some of the planned events,” she said.
Finance minister Mthuli Ncube last week said inflation is eroding consumer spending and devouring savings.
“It has been eating away our savings and our pensions, risking greater poverty. With inflation, long-term planning for companies becomes impossible as prices keep on changing,” Ncube said. “In the same vein, fiscal forecasts become distorted in an inflationary environment.”