Commission raises flag on price hikes

—Survey show outrageous increases
—Eggs, milk prices remain flat
— Beef prices rise the most

Darlington Musarurwa and Livingstone Marufu —
THE National Competitiveness Commission (NCC) – a successor body to the National Incomes and Pricing Commission (NIPC) – has raised the flag on astronomical price hikes for basic commodities, especially in the three-month period to February 2017, raising fears local consumers are being exposed to inefficient local manufacturers.

However, the Commission says rising prices which became noticeable in November 2016 – coincidentally the same month bond notes were rolled out to the market – could have been caused by rising fuel prices and the need by retailers “to cushion against foreign payment delays” to suppliers.

The price survey, which was conducted between June 2016 and February 2017, show that beef, flour and mealie meal prices increased the most in the three months to February, while egg prices actually dropped.

Milk prices were, however, flat. Interestingly, a 10 kg bag of the Red Seal Roller Meal brand, which is produced by National Foods, rose 9,4 percent from US$5,73 in November to US$6,27 by February.

Conversely, the same package for the Grain Marketing Board (GMB)-produced Silo Roller Meal fell 3,8 percent to US$5,29.

Blue Ribbon Industries premier Parlenta brand jumped 1,5 percent to US$7,58 in the period.

But it is the behaviour of flour prices for local and imported brands that is particularly worrying. While a 2kg bag of Gloria self-raising flour soared 15,4 percent from US$1,95 in November to US$2,25 in February, the imported brand of Snowflake self-raising flour fell 9,1 percent in the same period.

There were also discrepancies that were observed for cooking oil prices, depending on the brand. A 2-litre ZimGold bottle bought for US$3,43 in November had declined 0,9 percent to US$3,40 in February, but the Pure Drop brand rose 6,8 percent to US$3,45.

Surface Wilmar manufacturers Pure Drop from soyabeans and Pure Oil – a joint venture between Export Trading Group Tanzania and Parrogate Zimbabwe — produces ZimGold.

The price hikes were so far reaching that even match stick retailers had increased their prices by 8,5 percent to US0,51c by February.

Perhaps the biggest increase was for beef prices, which leapt 37,8 percent to US$7,65 per kg from US$5,55.

Observably, producers and retailers have been upwardly adjusting prices for the past six months. There were fears an additional 15 percent Value Added Tax (Vat) on commodities such as meat, fish, potatoes, rice and margarine that was supposed to take effect on February 1 as a culmination of Statutory Instrument (SI) 20 of 2017, could have burdened consumers even further.

The new tax has however been rescinded.

“The Commission attributes the price increases to a number of factors such as 10 percent to 15 percent increment from producers to circumvent foreign payment delays, bond note speculation, increase in the price of some raw materials on the global market, fuel price increases, and drought-induced food inflation, and the anticipated strengthening or stabilisation of the rand against the dollar.

“Some producers who source their raw materials outside the country have increased their prices by 10 to 15 percent to cushion against foreign payment delays, according to information obtained from the Confederation of Zimbabwe Industries (CZI).

“These producers are facing delays in making foreign payments to suppliers due to increased liquidity constraints facing the country,” said the NCC.

It is believed the price of soap and detergents rose as a result of corresponding increases in the price of Palm Fatty Acid, the major raw material, which rose 58 percent from US$600 to US$900 per tonne.

Fuel prices also rose. Petrol climbed 2,4 percent to US$1,30 per litre in the nine-month period between January and September from US$1,27 per litre.

It also rose 3,08 percent in November.

Diesel prices jumped 8,5 percent to US$1,15 per litre in the January to September period. Before the National Income and Pricing Commission (NIPC) was transformed into the National Competitiveness Commission through the gazette of the NCC Bill on September 23 last year, it had expanded powers to rein in unscrupulous retailers, but this unfortunately led to shortages.

Government consequently sheared off the contentious powers and created an entity that is supposed to help the country improve its competitiveness.

Last week, Industry and Commerce Minister Dr Mike Bimha said although Government hasn’t received any reports on price hikes yet, the issue will be looked into.

“I haven’t received any reports yet (about price increases) but it’s something that we need to know the exact information: Which are the issues? Which are the products? Then our people can investigate.

“We want to establish whether the prices are from the issues that Government can act on,” he said.

Confederation of Zimbabwe Industries (CZI) president Mr Busisa Moyo noted that in addition to retailers pricing in the 10 percent to 20 percent premium charged for facilitating timeous and convenient payments to foreign suppliers, the general economic uncertainty was also increasing business costs.

“We need stability, clear strategies and action to instil confidence in the economy. For example, the pending review to align indigenisation laws with the clarifications made by His Excellency (President Mugabe) in April 2016; fiscal expenditure reforms and the issue of the debt overhang resolution; a comprehensive stimulus package for productive sectors. “As companies struggle to bring in raw materials due to liquidity challenges, this will continue. “Some companies had employed people and brought in machinery to ensure the cover the gap created by import restrictions. This programme is now under threat if left unabated.

“The banking sector must prioritise raw materials, machinery, spares and follow the priority list given by the Reserve Bank and in particular those companies under import substitution or export generation,” said Mr Moyo.

He said the banking sector continues to fund non-essentials, luxuries and trinkets at the expensive of the productive sectors of the economy.

“It is this doubt in our own capacity and programmes that continues to hurt our own ability to create jobs, increase productivity and cross over into a growing economies. It seems we have faith and find solace in supporting imports which create jobs in other countries.

“Solve the issue of foreign payments, liquidity and you solve the issue of prices.”

Economist and chief executive officer of Mtilikwe Financial Services Mr Kingstone Khanyile, however, said it is hardly surprising that the same retailers that were arbitrarily raising prices during the hyperinflationary era are the same retailers that are currently guilty of the same offence.

He added that the present trend tends to soften consumer demand and work against Government’s broad objectives to promote local industry and economic growth.

“The upswing of local prices is merely a case of history repeating itself. Again the Zimbabwean producer and retailer have shown that once they find themselves cushioned from competition, they tend to excessively profiteer.

“Unfortunately, the local consumer has no option but to resort to the local producer.

“In an environment where prices increase, consumption does not increase; in fact, it does the opposite,” said Mr Kanyile.

He said there is need for Government to use scientific methods in policy making. Setting a ceiling and floor price by using the import price parity as a guide could be helpful, he said.

Source :

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