Zim woes beyond price controls, priority lists

Source: Zim woes beyond price controls, priority lists – DailyNews Live

10 November 2017

HARARE – To anyone who has a basic understanding of economics, the wave of
price hikes witnessed in recent weeks was nothing but the wake of market
forces.

The market – manufacturers and retailers, among other economic players –
was merely responding to circumstances on the ground.

But it seems our incorrigible government never learns and is really
handcuffed to its old impractical ways.

In a desperate attempt to curb the price hikes, it shockingly moved to
introduce price monitoring, under the guise of protecting the hard-pressed
consumers.

The archaic approach, tried and failed dismally in many jurisdictions,
could easily be interpreted as a ploy to mask President Robert Mugabe’s
failure to manage the economy.

It boggles the mind why after having introduced the infamous price
controls in 2007 – enforced by the National Incomes and Pricing Commission
– which led to acute food shortages, government would once again go down
the same path.

Back then, the measure was targeted at arresting galloping inflation, but
it didn’t work.

It was disastrous.

Shops ran out of stocks as manufacturers failed to produce at the imposed
prices, which were way divorced from the realities of severe foreign
currency shortages and high production costs.

While Industry and Commerce minister Mike Bimha, with the surprising
support of the Confederation of Zimbabwe Industries (CZI), argues the
price monitoring system will stop retailers and manufacturers from
“unjustifiably” increasing prices and in the process “protect consumer
rights”, the measure is nowhere near the panacea to Zimbabwe’s economic
woes.

And Confederation of Zimbabwe Retailers president Denford Mutashu has
aptly put it; government must address the root cause of the price
increases.

The root cause is the deepening foreign currency crisis. And behind it is,
of course, the failed leadership of 93-year-old Mugabe.

For a long time now, while monetary authorities hap on and on about the
priority list and increasing exports, industry has been buckling under
mounting pressures of the worsening foreign currency shortages.

Just like at the height of the 2006-8 economic melt-down, the companies,
which are failing to get foreign currency from the central bank despite
being on the so-called priority list, have been forced to turn to the
illegal parallel market where they can access the scarce foreign currency,
but at punitively steep rates.

And this has significantly increased the cost of production.

In its recently-released 2017 Manufacturing Sector Survey, CZI – an
industry representative body – even acknowledged it.

Addressing this crisis goes beyond price monitoring and priority lists.

Taking such desperate measures simply indicates how bad the situation is,
and the price hikes were only a symptom of a bigger problem Zimbabwe
faces.