Fund basic goods production, Govt told

The Sunday Mail

Africa Moyo
Senior Business Reporter

GOVERNMENT should consider re-introducing subsidies in the manufacture of basic commodities to stem the incessant price increases, retailers have said.

Wheat and crude oil imports used to be supported by Government through provision of foreign currency to ensure low prices but reports suggest Treasury has directed the manufacturers to the interbank market.

Industry and Commerce Minister Nqobizitha Mangaliso Ndlovu was not picking his mobile phone when contacted for comment.

The call to support manufacturers comes as prices of basic goods such as sugar, cooking oil and bread have risen in recent weeks, largely in response to the surging parallel market rate of foreign currency.

Last week, bread makers stunned consumers after increasing the price of a loaf to RTGS$3,50 from RTGS$1,70, while sugar was recently increased to RTGS$5,29 from RTGS$3,69. Cooking prices have similarly gone up to about RTGS$15 from RTGS$9.

Price rises have seen the year-on-year inflation rate jumping to 66,80 percent in March, from 59,4 percent in February, although month-on-month remains in positive territory despite rising to 4,38 percent.

In February, month-on-month inflation was 1,67 percent, having come down from 16,44 percent in October last year.

Confederation of Zimbabwe Retailers (CZR) president Mr Denford Mutashu last week said the rise in the price of sugar has affected several products that are made from the product.

Mr Mutashu said it has become imperative that producers of basic commodities such as bread and cooking oil should receive foreign currency from Government through the Reserve Bank of Zimbabwe so as to cushion consumers.

“Suppliers have increased prices, for example sugar, by more 120 percent over the last few months. Sugar is used both as a product at home and also in the manufacturing sector,” said Mr Mutashu.

“. . . I remember a lot of basic goods manufacturers used to get a lot of support but right now, almost everyone is being directed to the interbank where sometimes foreign currency is not available.

“So what it means is that we are leaving the supply of basic commodities to the vultures of market forces and the consumers will certainly become vulnerable (and) we believe that there can be a way that can be worked out to try and ensure that the suppliers and manufacturers of basic commodities are supported.”

Mr Mutashu said Government intervention in supporting the production of basic goods would allow citizens to “continue to have a decent living”.

Manufacturers have not said why prices have gone up but some have blamed the parallel market rate for foreign currency, for the surge in prices.

The RBZ has expressed disgust at the speculative pricing by some wholesalers and retailers.

RBZ Deputy Director for Economic Research Division Dr Nebson Mupunga, says traders “must play their part in ensuring fair business and pricing practices and desist from speculative tendencies”.

Economist Mr Persistence Gwanyanya told The Sunday Mail Business last week that the price increases have “nothing to do with the (macro-economic) fundamentals”.

“If money supply is not rising, what is driving the prices? There is no sensible, economically sound reason for the increases in prices other than just market manipulation,” said Mr Gwanyanya.

“It’s just a few suppliers of foreign currency who are just hiking the rate of foreign currency. This is just speculative to me, it’s just rent-seeking because the monetary position has not changed.

“We still have RTGS balances that we had, foreign currency supply is largely unchanged and the RBZ and Treasury have not created new money.”

A number of analysts expect the current forex rates bubble to burst a few days after the Independence and Easter holidays, driven by low RTGS balances.

Zimbabwe’s parallel market for foreign currency is thought to be dominated by “three or four” micro-finance institutions which market watchers say are “known to everyone”.