Source: ‘Price controls risk further shortages’ – DailyNews Live
Andrew Kunambura 27 September 2017
HARARE – Economists warned of worse shortages of basic commodities and an
expanding parallel currency market as the Zimbabwean government mulls
plans for new price controls across all sectors of production, to take
effect within the next weeks.
President Robert Mugabe has hinted at the introduction of a new price
control structure, which includes fuel, to curb what he termed “price
increase madness” by producers, wholesalers and retailers.
Addressing thousands of Zanu PF supporters soon after landing at Harare
International Airport from the United Nations General Assembly, Mugabe
said his government would deal with the issue in just two days.
“How can we have shortages of cooking oil and massive price hikes, all
this happening while I was away? These are saboteurs, who want to cause
panic against the government, so that people can riot against us, but our
people are clever. They will not be swayed in that way. This is not an
issue you should worry yourselves over. We will deal with it in just two
days,” he said.
Mugabe’s speech coincided with a statement purported to be from the
National Competitiveness Commission (NCC), chaired by renowned business
leader Kumbirai Katsande, warning of a crackdown on prices.
The statement said: “Please be advised that the NCC Board has dispatched a
taskforce to assess and inquire on pricing nationwide.
“Numbers of the officers are expected to increase as the week goes by as
part of government’s efforts to cover every part of the country.
“Retailers who may be found wanting will have their licences terminated
with immediate effect.”
But Katsande said: “It did not originate from us. In fact, we are just
settling in and putting things in place. We have not even started work
yet.”
Economists told the Daily News the mooted price control regime would
precipitate a shortage of basic commodities on a larger scale than
experienced before, because only a few producers are able to supply the
market at controlled prices and the majority may stop production.
Economist Kingston Khanyile said: “We are entering into the inglorious
sphere of hyperinflation. It is a world of economic chaos, wrenching
poverty and financial commotion.
“In this situation, you cannot rule out the possibility of price
controls.”
Economic analyst, Elliot Lumbe said the situation is likely to worsen as
the country trudges towards next year’s general elections.
“It is unfortunate that some people are causing alarm and despondency
ahead of elections by causing economic chaos. People should put heads
together and bury their differences for the purpose of economic
development instead of engaging in needless fights,” he said.
Commodity prices in Zimbabwe shot up in the past week as manufacturers,
wholesalers and retailers took advantage of a lull in the monitoring of
price controls, blamed on a shortage of cash, to raise their prices to
what they said were viable levels.
Leading financial research firm Equity Axis said the country’s monetary
system went into a “shock” in the week as the informal market exchange
rates for the RTGS and bond note relative to the US dollar drastically
plummeted, a syndrome of the debilitating economic environment.
Sentiments in the economy are that the economic situation will worsen and
economic participants are positioning themselves through accumulation of
assets and real money US dollars at minimum losses in a manner exhibited
on the Zimbabwe Stock Exchange (ZSE) over the past few months.
“An overrun budget, constant government overdraft demands, possible
election funding demands and a doubling up of the bond notes circulating
in the market are factors that have unnerved economic participants and
formed expectations of a worsening economy,” Equity Axis said in a
commentary issued yesterday.
“Rent seekers have likewise taken advantage of the expectations, mopping
the hard currency in the market for resell at superior rates.”
The country has also been convulsed by critical fuel shortages, with most
filling stations rejecting EcoCash and swipe cards and demanding cash.
This has left many motorists stranded as they cannot access the cash
demanded by fuel retailers, with long queues of anxious motorists at fuel
stations.
Efforts to get comment from Industry and Commerce minister, Mike Bhimha
were fruitless as his mobile phone was not being answered.
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