via Zim dollar mentality lingers – DailyNews Live 12 March 2015
HARARE – Zimbabwean products are expensive as “companies have failed to leave the Zimbabwe dollar mentality” of charging high prices, central bank governor John Mangudya said.
He said the scenario has made local products uncompetitive in offshore markets.
“There is need to adapt to the new realities of the United States dollar we are using if we are to be competitive.
Our companies have failed to leave the Zimbabwe dollar mentality behind as evidenced by high prices on products,” he said at an offshore investment conference on Wednesday.
Zimbabwe ditched its currency — ravaged by hyperinflation — in 2009 to adopt a basket of foreign currencies, dominated by the greenback.
Mangudya said local industry must change its mind-set if it is to make an impact on international markets.
“We can’t go into foreign markets because our products are expensive,” he said.
Economic experts say prices of goods and services in Zimbabwe are approximately four times more expensive than those in the region and about five times those in Europe and America.
Mangudya noted that there was need to bring foreign direct investment into the country to help revive the economy by resuscitating ailing companies that have failed to shake off a hangover of the decade-long economic crisis.
Apart from a biting liquidity crisis, Zimbabwe’s manufacturing sector has also been hit by erratic power supplies and as such, has to invest in alternative energy thereby increasing costs of production.
This has ultimately made local products uncompetitive in the region.
Shortage of long-term financing has also made retooling a tall order leaving companies stuck with antiquated equipment — creating production inefficiencies, which again lead to higher production costs.
As a result of the steep production costs and deteriorating economic conditions, hundreds of firms have closed shop in the last few years.
In his 2015 National Budget, Finance minister Patrick Chinamasa indicated that more than 4 610 companies had shut shop between 2011 and 2014 rendering more than 55 400 people jobless.