eBusiness Weekly
The Consumer Protection Act, passed into law in mid-year, did not cause much of a splash when it was gazetted, but it is now being implemented by the Ministry of Industry and Commerce and everyone can expect its provisions to become enforced and the Consumer Protection Council to be set up very soon.
It was a carefully drafted piece of legislation, largely drawing together odd bits and pieces and then brining everything up to date and, for the efficient businesses who try and follow generally agreed best practices it will not have a major effect, since what it wants businesses to do is what they are doing anyway.
Those who have some export markets, for example, have already redesigned packaging to comply with the global standards on labelling and even those who have yet to ship what they make out of the country have still almost automatically ensure that their goods can follow the rules, simply because at least some sections of the home market insist on certain standards.
But this will shortly become law.
Thing like honest weight, the right of a consumer to a replacement product if the example they bought was deficient and did not meet the generally accepted description, and other such sections were in the most part already governed by legislation of some sort. So again there should be, for the careful business, no major changes.
But producers and retailers do need to think about the information they are giving customers and, regardless of legal requirements, start treating customers well.
The ministry, in its initial foray under the new Act, did some price checking of 20 essential items in central Harare and central Gweru. Generally both retailers and producers received good marks. But the ministry did notice a handful of the 20 products they checked had increased in price, as well a couple that had fallen in price.
Retailers need to understand that the general public blame them for all increases. They can get round this if they carefully tell customers that the price of something has risen because the producer has raised the factory price.
Such is the competition in the retail sector, with even at the top end, the supermarkets, there being five chains who, from the different pricing they offer for many items, obviously cannot collude and in any case would be daft to do so since the modest competitive edges they have would then vanish.
And once you include the smaller shops, a meeting called to fix prices might well have to be held in something like the Harare City Sports Centre so as to find enough seats. All it takes is one retailer to break ranks and shopping patterns will change.
So consumers need to be kept informed as to why something as basic as roller meal has risen in price. Almost certainly this follows from a rise by the producer, and producers have been remarkably quiet and secretive about their price rises.
A more consumer orientated market would see such explanations as a matter of course, rather than have them extracted by force. The reasons might be good, in which case consumers would accept them. If the price rises are because farmers are paid more for the underlying raw product, for example, at least people would understand. If it was because packaging costs had risen, then there might well be suggestions that simpler packaging would be acceptable if this was a significant driver of price.
A couple of manufacturers of consumer goods in earlier decades did have two qualities of pack, mostly admittedly to avoid the problems of getting the bureaucrats who allocated foreign currency to allocate extra for local packaging, but the experiment has been tried.
But what now needs to be overcome, with the arrival of largely stable economic fundamentals, is the attitude of take it or leave it.
More and more people want to know why a price has risen, and even more importantly want to be convinced that there is a good reason, not just an attempt to profiteer.
The present economic reforms have ended most shortages and have allowed most producers to produce what they can sell. So real choices are now increasingly possible and scarcity pricing s no longer a long-term option. You can see some of the results of this growing competition in supermarket shelves, where there are differences in price between local brands, although with a few exceptions, the gaps are modest.
And, what is increasingly happening, the prices by the higher priced producer are falling to match, or nearly match, the prices offered by the lowest-price producer.
But, while it would be difficult to assemble a price-fixing ring at retail level, at the production level there are possibilities.
To take one example, bread. The three major industrial bakers do not compete on price, and that must be by agreement. Competition is limited to brand and taste. Yet no one can believe that the cost structure for each bakery is identical, or that the higher transport costs that must be incurred by one are exactly, down to the last cent, balanced by lower costs in other areas. Growing competition from smaller bakeries and from the in-house supermarket brands do offer choice, but the fact remains that there must be some consultation at the very least.
And this, obviously, is not even necessary where there is a monopoly or near monopoly. Such producers, with imports now expensive and no longer offering an completion, have a wide open door. It is this group that might well face the first pressure from the activation of the Consumer Protection Act.
There were once very good reasons why a producer price was basically fixed, sometimes even led by Government intervention as part of a quid pro quo. In return for guaranteed allocations of foreign currency, and to overcome the risks of scarcity pricing, the authorities would allow a maximum price to be set. But as supplies move into normal ranges, and so scarcity pricing becomes difficult or impossible, and as foreign currency now is almost all allocated at auction prices, these arguments fall away.
It is here that producers, and the downstream retailers, are going to have to rethink their business models and move into the normal global world, rather than hide in Zimbabwe’s murky past of the last 55 years when all sorts of controls were put in place.
The Government has been moving away from economic regulation by dictat to regulation largely by market forces, but with the Government carrying a referee’s whistle. And the biggest whistle in future is going to be that Consumer Protection Act, which will ensure that consumers can make rational decisions based on accurate information as to the composition and quality of a product.
Since the same ministry will be dealing with producers, retailers and consumers, it is reasonably well placed to ensure level paying fields for everyone. The two critical goals, of seeing producers thrive, grow and expand their ranges and seeing consumers get a fair deal are not incompatible or even in conflict. Market forces, especially with the elimination of scarcities that the present reforms have do so much to eliminate, will do much of the work, and the sort of sensible regulations on product information and quality control that exist in most countries will do much of the rest.
