Basic commodities shortage looms

A SHORTAGE of basic commodities is looming in the country, unless the current cash crisis is effectively addressed before the end of the year, analysts have warned.

Source: Basic commodities shortage looms – NewsDay Zimbabwe June 30, 2016

BY MTHANDAZO NYONI

Zimbabwe is currently facing a serious cash crunch, as a widening trade deficit and a stronger US dollar weigh on the economy. In a bid to ease cash shortages, the central bank has cut charges for electronic payments and also imposed limits on daily bank withdrawals.

But economic analysts, who spoke to NewsDay, said shortages of basic commodities like cooking oil and mealie-meal were imminent.

“The worst affected companies will be those that cannot obtain fuel or suffer crippling power cuts, so production stops and next in line will be the companies that produce valuable goods or services, but cannot sell them to people with no money,” economist, John Robertson said.

He said power and fuel problems might also force mines to close, resulting in foreign earnings faltering. Robertson said wages might then become impossible to pay, further reducing tax payments to the government.

“Lower wages or late wage payments will reduce demand from the shops, so these shops will also pay less tax. Government will then buy less from all suppliers and this will force down the delivery and quality of government services. Health and education will be directly affected,” he said.

Economic and policy analyst, Butler Tambo said Zimbabweans were likely to have one of the bleakest Christmas holidays post 2008-due to plans to introduce bond notes.

“The move by the Reserve Bank of Zimbabwe has already caused serious pandemonium, as most people fear the return of the Zimbabwe dollar and statements from Finance minister Patrick Chinamasa that there is no going back on bond notes have only exacerbated the situation and there is a current run on banks, which could trigger a banking crisis with seismic effects on the economy,” he said.

Tambo said investor confidence has also taken a huge knock, as about $1,5 billion in shareholder value was lost on the Zimbabwe Stock Exchange between January 2015 and January 2016, as the market continues to face challenges in a depressed economy.

“It will become extremely difficult for any investor to take their money out of Zimbabwe or even repatriate any profits or dividends back to their countries of origin and this can only cause the same investors to divest from Zimbabwe,” he said.

Analysts said the government needed to take radical measures to address the current economic challenges.

Robertson said the country needed big, imaginative and brave solutions that would immediately re-generate confidence and make the country highly attractive to new investors.

“Basically, the government has to stop interfering and start removing every kind of control that is there simply to force obedience and compliance. Government should facilitate, not regulate,” he said.

Robertson said police road-blocks should be eliminated, Zimra inspectors should be trained to help taxpayers, not to intimidate and threaten them, bank account garnishees should be banned and lawbreakers should be prosecuted, whoever they were.

“Labour laws should be redrafted to remove threats against employers and one month’s notice either way should replace all forms of severance or retrenchment pay,” he said.