eBusiness Weekly
Africa Moyo
The Reserve Bank of Zimbabwe (RBZ) has expressed concern over the speculative pricing by wholesalers and retailers, which has stunned the market at a time when experts were expecting the inflation rate to start falling.
This comes as retailers and wholesalers effected a fresh round of price increases on Tuesday, allegedly in response to a jump in the rate of foreign currency on the parallel market.
The rate of the US dollar against RTGS dollars soared to 1:5 on the parallel market, in a development that stunned market watchers who argue that there are no fundamentals to support such a high rate given that citizens and individuals lack the domestic currency while the tobacco selling season has just opened.
On the interbank foreign currency market, the rate was 1;3,1676 on Tuesday.
But with many companies claiming that they can’t access forex on the interbank market, several executives are reportedly flocking to the parallel market to access forex “just to keep the wheels of industry turning”, bread makers increased the price of bread from RTGS$1,70 to RTGS$3,40 while quick service restaurants also increased prices by anything between RTGS$2 and RTGS$5.
Last week, RBZ Deputy Director for Economic Research Division Dr Nebson Mupunga said it was critical for traders to ensure fair pricing practices.
“Wholesalers and retailers must play their part in ensuring fair business and pricing practices and desist from speculative tendencies,” said Dr Mupunga.
Statistics released by the Zimbabwe National Statistics Agency (Zimstat) on Monday show that the year-on-year inflation rate rose to 66,80 percent in March, under the new base used to calculate the consumer price index.
The new base is in tandem with international guidelines.
Under the old system of calculating inflation, the month-on-month rate for March would have been 166 percent.
But the central bank insists that inflation would stabilise by the end of the year if “we all work to achieve it”.
Dr Mupunga said with month-on-month inflation declining from 16,44 percent in October last year to 1,67 percent in February this year, prices were expected to stabilise.
However, there was a blip in the March month-on-month inflation after the rate went up to 4,38 percent, gaining 2,71 percent.
This means that prices as measured by the all items CPI increased by an average rate of 4,38 percent from February to March this year, giving fresh headaches to monetary and fiscal authorities.
Analysts say inflation is pacing up due to demand for foreign currency on the parallel market as citizens seek a reliable store for value.
Government has indicated that it is exploring mechanisms of ensuring that the National Competitiveness Commission (NCC) works together with industry to craft strategies on pricing of goods.
Industry and Commerce Deputy Minister Raj Modi last week said it was important that the NCC was capacitated to allow it to play its mandate of examining cost drivers to improve business competitiveness using the value chain approach.
The NCC was set up in 2017.
Deputy Minister Modi said the NCC is currently doing “the best they can under the current circumstances”, as the organisation does not have a CEO and other critical executives.
“I hope that industry players in all sectors of the economy will work closely with the Commission in their work.
“My ministry is also looking at how the NCC can, together with suppliers, wholesalers and retailers, engage to come up with best practices on pertinent issues of pricing, standards and service delivery.
“There is need to agree on how our products can be priced using reasonable mark-ups especially between wholesalers and retailers as your role is critical to consumers,” said Deputy Minister Modi.
Both retailers and wholesalers are currently expressing concern over dwindling demand as consumers have been milked dry and cannot continue purchasing goods at the obtaining higher prices.
Waning consumer demand is expected to fall even further in the near future on the back of the latest round of price increases, especially for products that have substitutes such as bread.
Government says it is “fully” cognisant of the challenges confronting retailers and wholesalers, which include lack of regulation of the informal sector, smuggling of goods, price distortions, vending, and demands for wage and salary adjustments by employees.
Deputy Minister Modi said through working together, some of the challenges would be overcome.
“The engagement between Government and private sector to improve the doing business environment is an ongoing process and this should help in alleviating some of the challenges,” he said.
The new administration led by President Mnangagwa is pushing for a private sector led economic development.
