Rates, fees cited for basic goods price hike

Source: Rates, fees cited for basic goods price hike | Herald (Business)

Mr Mutashu

Golden Sibanda
Senior Business Reporter


The general increase in rates and fees for a number of services that occurred over the last two months is the underlying cause of the spate of price hikes witnessed in the past few weeks.

While the country had enjoyed notable price stability since the introduction of the auction system in June last year, there has recently been price increases across products.

Retailers said the increase resulted from a number of factors among them price increases by producers, arbitrage and opportunism by few players allowed to open during the lockdown period.

Manufacturers, however, argued that business have been responding to the general adjustments in various rates and fees across the economy and the absorption of these costs reflected in price increases as the costs are passed on to the consumer.

This has reflected in surging monthly inflation, which surged by 4,22 percent in December last year and jumped 5,43 percent last month, according to the Consumer Price Index (CPI) from the Zimbabwe National Statistics Agency (Zimstat).

On an annualised basis, Zimstat said prices of goods and services in Zimbabwe increased by an average of 362,63 percent between the period January 2020 and January 2021.

Reserve Bank of Zimbabwe (RBZ) monetary policy committee (MPC) member Eddie Cross, said last Friday the general increase in price, at variance with targets of the monetary authorities, was worrying.

“There has been significant growth in money supply, especially in the last quarter of last year; I think we ended the year (2020) up at 117 percent year on year basis.

“In January, the stock market expanded substantially, we saw some dramatic increases in prices, I think that suggests growth in money supply; this should be receiving more attention. I am struggling to know what the reason is,” Mr Cross said in an interview.

Mr Cross said if that situation is not put under control, monetary authorities could be countenancing the prospect of missing inflation target for the year, which they had forecast to average less a percent (1 percent) for much of this year, for the monthly rate.

The central bank forecast the annual inflation rate to close the current year below 10 percent on account of a stable exchange rate and efforts to rein money supply growth.

But Confederation of Zimbabwe Industries (CZI) said there has been general increase in rates and fees since October last year and this culminates in the prices hikes consumers have to bear.

“This is as a result of a number of things. What happens is that a number of things (rates and fee increases) happen over a period time and that builds towards price increases, for example the price of fuel has just gone up, but it is only an isolated factor, but companies build the price increase into their product prices.

“What consumers eventually see are general price increases. For instance, we had price increases for electricity twice in October and November (last year); council rates went up, ZINARA rates went up, and electricity tariffs were adjusted (once) again.

“I am not saying this everything that caused the price increases, but these factors contributed to the price increases. The exchange rate from the auction has been stable, but the parallel market rate, where some manufacturers get forex, has been going up, that also contributes,” he said.

Confederation of Zimbabwe Retailers president, Denford Mutashu, said there has been significant increase in prices of basic goods that include maize meal, rise, bread, salt and cooking oil.

Mr Mutashu said in their conversations with producers they were told that there had been increases in operating costs, which caused manufacturers to pass on to the consumers by hiking prices.

“Prices have been going up gradually during the period before the second lockdown. After the auction was introduced, prices were nearing stability and almost never went up,” Mr Mutashu said.

But this changed in the second phase of the national lockdown, with the few entities allowed to operate being overwhelmed by demand, leading to price hikes “due to forces of supply and demand”.

“Almost all manufacturers increased prices,” he said.

“When the prices go up, we have serious challenges because the consumers cannot afford. In a lockdown period, we should work together with Government to identify the 17 basic commodities and sit down with manufacturers of each of those… so that you will not have the cost of those going up in the middle of a pandemic,” he said.

The CZR president also said they had observed that while the issuance of exemption letter had helped increase production and supply of basic goods, the process was a tad slow.

“A number of informal businesses closed yet they had been serving very large part of the population and these sell mostly in cash and buy on cash so they get large offer discounts. That helps reduce prices. The large businesses that only pay manufacturers after a number of days do not get these discounts.”

Mr Mutashu said it was critical that a number of businesses, formal and informal, remain open in order to allow for healthy competition that leads to lower prices for the consumers as players battle to outdo each other.

what the reason is,” Mr Cross said in an interview.

Mr Cross said if that situation is not put under control, monetary authorities could be countenancing the prospect of missing inflation target for the year, which they had forecast to average less a percent (1 percent) for much of this year, for the monthly rate.

The central bank forecast the annual inflation rate to close the current year below 10 percent on account of a stable exchange rate and efforts to rein money supply growth.

But Confederation of Zimbabwe Industries (CZI) said there has been general increase in rates and fees since October last year and this culminates in the prices hikes consumers have to bear.

“This is as a result of a number of things. What happens is that a number of things (rates and fee increases) happen over a period time and that builds towards price increases, for example the price of fuel has just gone up, but it is only an isolated factor, but companies build the price increase into their product prices.

“What consumers eventually see are general price increases. For instance, we had price increases for electricity twice in October and November (last year); council rates went up, ZINARA rates went up, and electricity tariffs were adjusted (once) again.

“I am not saying this everything that caused the price increases, but these factors contributed to the price increases. The exchange rate from the auction has been stable, but the parallel market rate, where some manufacturers get forex, has been going up, that also contributes,” he said.

Confederation of Zimbabwe Retailers president, Denford Mutashu, said there has been significant increase in prices of basic goods that include maize meal, rise, bread, salt and cooking oil.

Mr Mutashu said in their conversations with producers they were told that there had been increases in operating costs, which caused manufacturers to pass on to the consumers by hiking prices.

“Prices have been going up gradually during the period before the second lockdown. After the auction was introduced, prices were nearing stability and almost never went up,” Mr Mutashu said.

But this changed in the second phase of the national lockdown, with the few entities allowed to operate being overwhelmed by demand, leading to price hikes “due to forces of supply and demand”.

“Almost all manufacturers increased prices,” he said.

“When the prices go up, we have serious challenges because the consumers cannot afford. In a lockdown period, we should work together with Government to identify the 17 basic commodities and sit down with manufacturers of each of those… so that you will not have the cost of those going up in the middle of a pandemic,” he said.

The CZR president also said they had observed that while the issuance of exemption letter had helped increase production and supply of basic goods, the process was a tad slow.

“A number of informal businesses closed yet they had been serving very large part of the population and these sell mostly in cash and buy on cash so they get large offer discounts. That helps reduce prices. The large businesses that only pay manufacturers after a number of days do not get these discounts.”

Mr Mutashu said it was critical that a number of businesses, formal and informal, remain open in order to allow for healthy competition that leads to lower prices for the consumers as players battle to outdo each other.

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