Manufacturers must set prices

14 Nov, 2017 - 15:11 0 Views
Manufacturers must set prices File pic of the RBZ head quarters in Harare.

eBusiness Weekly

There has been a fair amount of good economic news recently as Zimbabwean businesses start looking at their business fundamentals. First imports are continuing to fall and the gap between what we export and what we import is continuing to narrow. There are consumers who feel hard done by, not being able to buy the imported products they have become used to over the past nine years, but in most cases there are acceptable Zimbabwean alternatives.

A glance around the shelves of major supermarkets in Harare’s northern suburbs will show the rational policies now being followed, and the opportunities being seized by those Zimbabwean industrialists who would rather expand their businesses, fighting imports on both price and availability, than sit and complain.

There are gaps in the shelves, but these gaps are generally of brand rather than product, and the space allocated to Zimbabwean-made goods is swiftly expanding. It is clear that the more responsible retailers are not only pressing local industries to fill gaps and co-operating on promotions and the like, but are also being a lot more careful about which brands they import with their scarce foreign currency, trying to get the best value.

Secondly the RBZ is being a lot more generous over its export incentives for Zimbabwean manufacturers, going as high as 17,5 percent, presumably for products that have minimal imported inputs and plenty of local input and skill. That level of incentive is equivalent to what a 15 percent devaluation would produce if Zimbabwe had its own currency.

The fact that a formal devaluation is impossible when we use the US dollar as our unit of account means that a variable incentive system is required rather than a single one-off figure to produce the same result. Zimbabwean manufacturers have presented a solid case over the past few years about their costs, denominated in US dollars, rising against neighbouring currencies whose central banks can allow to fall moderately against the dollar. Now they are getting what they have been seeking.

Thirdly a growing convergence of views between responsible manufacturers, retailers and the authorities is starting to produce a degree of consensus on how we tackle pricing of key essential consumer goods, the sort of thing that most households have to buy every month.

Imported inputs for these products are generally paid through the official banking system, often with extra allocations from the Reserve Bank of Zimbabwe, so there are no parallel market premiums. This means that their price should rise and fall in line with global market prices for the inputs.

There is some debate about how price monitoring and control could work in Zimbabwe. We believe a light touch is required, especially as the major elements in our business community have shown that they are willing to not just be responsible but enforce responsibility. Cooking oil is one good example.

The makers explained their requirements and problems, extra currency was allocated for soya imports and now local cooking oil is back on the shelves. Responsible retailers did not ration by price but by imposing quantity limits, which have now risen to around six bottle a customer. Prices are advertised.

We have the example of Delta for many years, which with its near monopoly obviously had to tread carefully, advertising maximum prices, enforcing these in its distribution chain, and contracting farmers for inputs. Other manufacturers are applying a similar model.

We think much price monitoring of essential goods, and the 15 products that people talk about seems about the right number, can be done by a very small committee. A couple of officers each from the RBZ, who can give figures as to allocations for inputs, the Ministry of Industry and Commerce, which is responsible for import licences, organised industry and the wholesale and retail trade, and perhaps someone from the Consumer Council of Zimbabwe which ought to be taking the lead in building up better co-ordination between industry and retailers. But seven or eight people meeting once a week should be able to ensure there is no cheating in essential prices and that increases and decreases are explained.

Temporary shortages should also be explained, rather than leaving people at the mercy of the worst conspiracy-theorists swimming in the wilder waters of social media.

At the same time, as the percentage of consumer goods made in Zimbabwe rises, we do need to watch our industrial sector. When Zimbabwe had a closed economy there were many cases of sub-standard goods being sold at inflated prices, and the fact that in many areas there are near monopolies or duopolies does allow collusion. It used to be said that a two-some or a four-some on a golf course could fix a lot of prices.

The obvious solution, of course, is for us to build up exports so that we can retain the corrective of imports. A fair number of Zimbabwean industrialists over the past eight years have re-invested and rebuilt their industries, and had got to the stage where they could compete on price and quality in an open market. We need to retain that so that as regional markets become ever freer, our industry can take its fair share on merit.

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