Daggers out over price controls - Zimbabwe Situation

Daggers out over price controls

Source: Daggers out over price controls – NewsDay Zimbabwe April 25, 2019

BY BLESSED MHLANGA/ TATIRA ZWINOIRA

BUSINESS has come out against price controls and accused those pushing for such controls as fronting agents of regime change in the country.

The spectre of price controls looms large after President Emmerson Mnangagwa and other senior officials in his administration have accused business of profiteering and wantonly raising the cost of basic commodities.

But Confederation of Zimbabwe Retailers president Denford Mutashu said anyone pushing for price controls was doing it for selfish reasons, saying prices can only be brought down through a strategic development of the manufacturing sector.

“Price controls should never be one of the options and it is my firm belief that those pushing for price controls are doing so for selfish ends and with a wild dream of bringing the government down. The unintended consequences of price fixing include creation of the black market, further price distortions and empty shelves,” Mutashu said.

Former Finance minister Tendai Biti concurred that price controls would result in serious shortages of goods.

“It is total madness because it’s government itself which is at the epicentre of the price increases,” Biti said.

“It is government itself which has mismanaged the monetary policy instead of re-dollarising. It has tried to de-dollarise and the net consequence is that we have a black market which is flourishing, the black market rate right now is around 5,2 and once the cost of the US dollar goes up, this means the cost of things goes up. If there is anything that requires price control it is controlling an arrogant and incompetent government; that is the one that needs controlling.”

Biti said the introduction of people’s shops, as suggested by Mnangagwa, would not work because it had failed before.

“Those things don’t work, they are not working in Venezula; they did not work when we had Baccosi shops in 2007, 2008. It does not work, allow the market to work remove distortions dirigisme and the mark will do the job for you.”

Confederation of Zimbabwe Industries president Sifelani Jabangwe said the economy works on supply and demand coupled by other economic forces and not commands.
“Price controls have shown in the past that they do not give us the result that we want,” Jabangwe said.

“If anything, they escalate the situation. Definitely, we recommend against such measures. The prices are a reflection of policies on the ground, so they are symptoms of the challenges that businesses are going through.”

He added: “What we need to do is really identify what the problem is and the problem we have seen before is aligned to the moving exchange rate. We can correlate any movement of prices to the movement of the exchange rate.”

However, the Zimbabwe Congress of Trade Unions (ZCTU) accused business of double standards after refusing to increase salaries for their workers, yet increased prices of their goods.

ZCTU president Peter Mutasa said business were the authors of austerity measures and neo-liberalisation of the economy and must, therefore, disguise their shenanigans by increasing prices.

“You can’t get out of a recession by implementing austerity measures, because you will kill domestic demand, you invariably kill the economic activity, the few companies that are still there and you bring a lot of hardships to the citizens,” Mutasa said.

“So, business was disregarding all that and we also warned them against continuing with the bond note, but they wanted them because government had taken a cooperate welfare approach where it was taking resources from the poor and giving them to the rich, the companies and shareholders under the guise that they were subsidising exports.”

Mutasa added: “Business was also happy with the continued creation of money, ignoring the warning that we should fight together, now that the business is taking the heat of austerity and neo-liberalism, they are now covering themselves by increasing prices while salaries are stagnant, those are double standards.”

Mutasa pointed out that the current crisis in the economy needed business, labour and government to meet and find a lasting solution which will balance the fortunes for everyone, otherwise unhappy workers could take to the streets.

“We are, however, not encouraging our workers to take to the streets, but a dialogue to end this crisis, but this is entirely up to government to make a choice. They can call for dialogue and solutions can be found or they can choose to ignore,” he said.

Meanwhile, as business and labour haggle over the price issue, government appears to have no immediate solutions to the recent spate of price hikes that has ravaged the country and forced labour unions to demand for salary hikes after business refused to bow to Mnangagwa’s request to reduce the prices of goods and services.

After Tuesday’s Cabinet meeting, Finance minister Mthuli Ncube failed to give a concrete response on how government was planning to contain the spiralling prices that have effectively eroded people’s disposable incomes, leaving almost the entire population dangling below the poverty datum line.

“The issue of prices was not a subject matter of discussion today (Cabinet), but it has been an issue over the couple of days,” Ncube said.

“But suffice to say, government will continue to be seized with the matter, that is why we are making sure that we keep the lines of dialogue and communication open with industry so that there are no surprises, so that we try and understand their pricing models. We work together to make sure that there are no surprises in terms on hikes.”

The country was hit by a wave of price increases last week, with bread prices soaring to ZWL$3,50 for a standard loaf up from ZWL$2 following a 50% hike in the prices of mealie meal and flour. This created a domino effect on prices of other basic goods and services.

But in response to the bread price hikes, Ncube said: “What we have done as government is to open up access to GMB (Grain Marketing Board) to the smaller bakers as well, so as to increase competition.”

Business appears to be digging in saying they can’t lower prices owing to acute foreign currency shortages.

Struggling to get foreign currency at the bank rate, business has been forced to stretch into the black market where rates have risen to ZWL$520 for US$100.

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