EDITORIAL COMMENT : More competition means a better deal for consumers

ONE major element in much of Zimbabwean manufacturing of consumer goods is the high degree of monopolies or of concentration of the manufacturing in a small group of companies that seem to be either very close friends or be willing to informally retain market shares with minimal competition.

As we witnessed during the burst of inflation in the second corner of this year, this can lead to some very questionable practices with prices determined through trying to guess what the exchange rate would be in a couple of months, or by pushing up the US dollar price so that when it was converted to local currency the end result was using a much higher exchange rate.

We are now approaching the end of the third quarter and while a lot of progress has been made we still have the effects of those questionable practices and manipulations of more than three months ago, along with pressures for the authorities to ease back on the measures taken to break the sort of undesirable policies followed by some.

The latest pressures come from the sugar industry, with worried growers concerned about the imports reducing demand for locally-milled sugar and so reducing demand for their crop.

This is fair enough as it was not the local growers, or for that matter strictly speaking the local miller, who created the conditions for the Government decision to allow open imports of sugar without customs duties.

A small basket of essential consumer goods was put in a category that allowed imports without special licences, and those imports to be duty free. For those who remember, sugar went on the list because it largely disappeared from supermarket shelves.

Some of this was because households were stocking up on essentials as they appeared for sale as soon after payday as possible. Buying the month’s groceries before prices rose again made sense. But that would not have created the sort of shortages we saw. There were others who were buying far larger quantities of goods that looked as though they might be becoming scarce, probably to feed black markets, and President Mnangagwa noted that at least one group of wholesalers and retailers were stockpiling sugar, probably to corner the market and thus being able to resell the goods at a much higher price in scarcity conditions.

It is unlikely that the sugar miller was involved, but on the other hand they must have known something was odd when orders from some customers started rocketing and they were unable to supply other regular customers.

They could have moved into some sort of rationing if necessary. Ignoring what may be going on downstream in retail markets is quite legal, but not always the best way to build customer loyalty.

The President was also very critical of the pricing policy followed by one of the largest, if not the largest, of the agri-food processing companies, one that even without monopolies still has large market shares and whose actions can, and did, affect markets.

In light of the fact that someone, between the sugar farmers and the consumers, was limiting sugar supplies, and the fact that pricing of other essential products no longer made much sense even with the volatility of the exchange rates at the time, the Government opened the doors to import competition.

That ensured that regardless of what those along the distribution chain might or might not be doing, essential food would not be in short supply and that the price of the imports would effectively cap whatever the manipulators and the black market dealers would be able to charge. It was one of the factors that helped pop the bubble that had arisen in the exchange rate.

Now, of course, those who had to cope with imports and if necessary make changes so that they could compete, and even in many cases get to the stage where the retailers were willing to deal with local manufacturers rather than import, want that Government policy reversed.

This is not the best idea. The easy way of beating back on imports is to have a local product that meets three conditions: It must at least match quality, and preferably better that of the import; it must compete on price, and that means it should be lower in price, once delivered, and certainly never higher; and finally it must be readily available so that a customer just places an order and the product arrives promptly, as is the case with imports.

This is the way it is going to have to be done in the future in any case. Africa is moving towards free trade. Already there are the regional free-trade areas that have made a lot of progress and all of these are in the process of being combined into the African Continental Free Trade Area, covering the whole continent.

Free trade areas look at lowering and then removing tariff barriers, and non tariff barriers, for goods and services that meet the rules of origin, in this case being made from African raw materials within Africa. That means we will be seeing more potential imports able to enter Zimbabwe without paying duty and without needing an import licence.

It would be smart if our local industrialists could not only compete in their own back yard, but also be efficient and strong enough to compete in other backyards and get their fair share of the continental market. But they can practice now by being able to successfully compete against imports in their own country.

We are already seeing the virtues of competition. The price war now waging in the soft drinks sector shows, if nothing else does, how antagonistic competition can produce a win for consumers without wiping out the manufacturers. This means that our industrial growth policy should also be looking at new investors and a lot more competition.

The more suppliers there are, and the more suppliers are independent of each other, the better the deal that consumers will get. This will also produce the sort of companies that Zimbabwe needs to be competitive exporters as trade across Africa becomes ever freer.

Meanwhile, having at least the potential of competition from imports will keep the local producers on their toes and ensure that they stop taking their customers for granted and start thinking about how to create and retain markets.

You Might Also Like