Price hikes hit Zimbabwe

Source: Price hikes hit Zimbabwe | The Financial Gazette March 9, 2017

PRICES of basic goods such as mealie-meal, meat, soap, toiletries, rice, sugar and vegetables are spiralling out of control due to a currency crisis precipitated by foreign currency shortages.
The price increases will worsen consumers’ situation because disposable incomes have always been under pressure due to a combination of poor salaries, high unemployment and the fact that Zimbabwe is a high cost producer.
In fact, commodity shortages are already creeping in, with most retail shops running out of some essential goods due to foreign currency shortages.
The price of chicken cuts has risen from around US$6 to US$7,80 and US$8,00 for a 2kg pocket, while a kilogramme of beef now costs US$5,90 in most retail outlets, from about US$4,30.
A two-kilogramme pack of rice now costs up to US$3,20, from about US$1,89 while a two-kilogramme pocket of sugar now retails at US$2,00 from US$1,89.
A 10kg bag of unrefined mealie-meal now costs US$6,40 from about US$5,90.
Prices for toiletries such as tissues, soap, toothpaste, vaseline and body lotion have also increased by an average of 20 percent.
Electrical hardware prices have also increased over the past two months, with market players attributing the development to cash and foreign currency shortages in the country.
The increases are taking place at a time when most companies are facing challenges in accessing hard currencies for the importation of key raw materials, with banks failing to settle their international payments on time.
Some have been compelled to resort to the black market where they pay a premium of up to 20 percent.
This has had the effect of increasing prices for goods and services.
Zimbabwe relies heavily on imported goods mainly from South Africa and produces very little domestically. Some retailers have also become accustomed to making huge margins due to the high cost of doing business and the desire to make super profits.
Figures from the Consumer Council of Zimbabwe (CCZ) confirm there has been an increase in prices.
The cost of living as measured by CCZ’s low income urban earner monthly basket for a family of six increased from the December figure of US$577,97 to US$590,52 by end of January 2017, showing an increase of US$12,55 or 2,17 percent.
The food basket increased by US$11,30 or 8,49 percent from US$133,06 by end-December 2016 to US$144,36 by end January 2017.
According to the Zimbabwe National Statistics Agency (ZIMSTATS), the country’s inflation continued on its upward trend to reach its highest level in more than 24 months in January as consumers spent more on bread, cereal, fish, sea food, oils and fats among other products.
ZIMSTATS said the year-on-year inflation rate for January, as measured by the consumer price index, stood at minus 0,65 percent, gaining 0,28 percentage points on the December 2016 rate of -0,93 percent.
Confederation of Zimbabwe Retailers (CZR) president, Denford Mutashu, said the price increases were not widespread. He said “sporadic” increases had been noticed on few non-basic items.
“There is a hidden cost being experienced by manufacturers. Price increases have been noticed on fruits and vegetables and have been attributed to excess rains that have affected harvest on tomatoes, green vegetables and other farm produce,” he said.
There are some goods such as tomatoes and cabbages that have been affected by rains. These are now in short supply and prices for these have increased. The increase, however, is temporary.
Mutashu insisted that the price increases were temporary and that the market would self correct as it has always done before.
“Remember at some point the economy experienced deflationary pressures due to contracting demand. There is no need to panic because the CZR is on the ground working with relevant stakeholders to ensure dual pricing, where there is a cash price and a swipe or transfer price, is corrected,” he said.
He was referring to a pricing regime adopted by some retailers giving discounts for United States dollar cash purchases while charging a payment for transactions effected through the Real Time Gross Settlement System or swipe cards. Mutashu said there was need to increase production locally to stimulate exports and generate more foreign currency. Some supermarkets and retailers said they did not increase prices but adjusted them to their correct levels after promotions during the festive season.
Economist, Evonia Muzondo, said price increases were due to the shortage of foreign currency on the market. Companies were sourcing foreign currency at a premium on the parallel market mostly to import goods.
“Companies cannot absorb all those costs and therefore pass the biggest chunk to the consumer. Some (retailers) also take advantage of the situation to increase their prices unjustifiably,” she said.
Economist, Trust Chikohora, said the recent wave of price increases was a result of retailers passing the cost to customers.
“The US dollar is now scarce and not much is being produced locally. As a result, companies are converting their bond notes to US dollars at a higher rate. They have to recover those costs along the chain. The end user is the one that feels the pinch,” he said.
Brains Muchemwa, an economist, agreed, saying there was no way businesses could pick additional costs from the foreign currency black market and not pass them to consumers if they wanted to remain in business.