THE INTERVIEW Eliot Ziwira
EZ: There have been rather wanton price increases by retailers lately amid panic-buying by consumers; a situation that does not augur well with the generality of citizens who feel that they are being short-changed by profiteers. What is your response to that?
DM: It’s unfortunate that we have come to use such strong terms like price madness, exorbitant pricing, profiteering and the like. This is unfortunate because prices have been stable throughout the year. When we look at prices of basic consumer goods; they have steadily gone up within expectable margins and inflationary rates. In September, the inflation rate was around 4 percent and if you look at price increases you will realise that they were within that range. For example, the average increase on the consumer basket from January to December was about $8.
I don’t think it is fair to look at the price increases narrative from a blame-game point of view, accusing the retail sector of having not played its part in stabilising the economy, because we have been part of the engagement process since before the harmonised elections of July 30, when the President came up with an initiative to set up a price stabilisation committee headed by Vice President Constantino Chiwenga, and this has been quite helpful in so far as meeting with the value chain players and understanding the parameters, the challenges and the price increase rate; price movements as it were in view of maintaining viability and affordability, viability on the part of business, and affordability on the part of consumers.
EZ: So in your view what could have triggered the recent wave of price increases?
DM: It’s not far off from the apple tree. The apple has not fallen far from the tree. The recent announcement by the Minister of Finance and Economic Development Prof Mthuli Ncube, especially the first point was the announcement towards decimating the bond note. I don’t think it was done appropriately, if I may call that, or if it was supposed to have been done so publicly, because it caused jitters in the economy, jitters in the minds of consumers, jitters in the mind of business. Because the moment that you want to exterminate/decimate a surrogate currency, you certainly need to have a backup plan. So we want an exit strategy.
The moment you touch on the bond note, the moment you devalue the RTGS balance by speaking to the issues of separation of the FCA nostro from FCA RTGS, and speak about ring-fencing, because the moment you speak about ring-fencing, you are simply saying that the incoming hard currency may be contaminated by the RTGS balance or bond note. So what does it say about that currency.
EZ: If I read you well, you seem to be saying that whatever is happening in the economy at the moment, which has led to jittery, is largely speculative?
DM: Maybe I can agree that it is largely speculative, because on the one hand, you have consumers who want to quickly offload their RTGS balances or bond notes, because they don’t know whether the lifespan of that particular currency is going to be long-term vis-à-vis the policymakers’ allusion that the bond note may terminate in December. So people rushed in attempts to offload whatever RTGS balances that they had. This is the reason why people went on buying sprees, panic-buying sprees and hoarding various consumer goods. And to a larger extent unnecessarily, because probably people thought that goods like sugar, cooking oil and the like would run out the following day. But sugar and cooking oil supplies remained consistent.
Basically what we are saying is a bit of panic in terms of trying to strike the right balance, so as not to lose out on the impending devaluation of RTGS balances and bond notes against an appreciating US dollar, which is actually rampaging on the market right now, as you may be aware. Currently if you go on the black market, which is illegal anyway, yes rates have been tumbling after reaching a high of 600 percent, and to about 150 percent, but that 150 percent was meaningless, because no one was transacting, with those with US dollars holding on to them in anticipation of a firm increase in rates and premiums. So the move by the Government to try and decimate the parallel market is quite commendable, but it has got to be supported by initiatives to ensure that which is going to be pushed away from the market due to its illegality finds its way comfortably back into the legal and formal system, otherwise we may even create a further problem again if we do not manage it so well that we create a platform where that which was being traded on the informal market can now be traded on the formal platforms.
EZ: There seems to be pricing discord as manufacturers are maintaining that they have not increased prices, or have hiked them nominally, yet retailers are increasing prices on a daily basis, if I may say. What is your response to that?
DM: The problem that this country is facing my brother is lack of sustained production to meet local demand, let alone to export. The problems of price instabilities are more pronounced in times of shortages. If supply fails to meet demand, or surpass it we will have problems in pricing. Hence, right now a lot of retailers have maintained their mark-ups, which is key and which is quite pronounced. But I am sure you will agree with me that, like Government has also agreed, the economy has largely become informal. We appreciate that in charging the two percent tax, the Government has moved in to incorporate the informal sector, but it is not enough because the informality of this economy has spread across sectors; from manufacturers, retailers and all other service providers. We need a long term strategic plan to bring in all those players who are in the informal sector, so that they can be formal.
In times like these, it will be very easy to implement any policy initiative that we may come up with. The danger that we have is to try and police the few formal retailers and ignore informal traders. They remain out of control, behaving in whatever way they deem profitable to them, taking advantage of the situation to engage in speculative pricing. So what we saying as the Confederation of Zimbabwe Retailers as we have always been saying for the past year or so, is that the Government must sit down and strategically come up with a plan on how to incorporate the informal sector into the mainstream economy without causing hurt or harm to the already formalised sectors.
EZ: In your view how could this issue of the two percent tax have been handled, since you agree that it, indeed, is a noble idea?
DM: Before I come to the two percent tax, I have to go back to the issue of manufacturers who are claiming that they have not increased prices. It is something that is quite convenient to them to sweet talk the Government into a crisis, like that we seem to be grappling with at the moment; a crisis of price instability. It is treacherous for them to do that because they should come out in the open and admit that the supply side is constrained. They simply are not competitive, and some have even gone to the extent of taking advantage of the protectionist policies that the Government has come up with, for example, SI 64 of 2016, which is now SI 122 of 2017; by engaging in some conduct that is not in line with best practices. For example, how do you justify a player who receives foreign currency from the Reserve Bank of Zimbabwe, and goes on to demand foreign currency from retailers? That is serious double dipping which must be curbed.
Yes, we welcome investment. That investment should not be seen to be destabilising the economy and disadvantage the people of Zimbabwe. Oil processors must own up to their failure to earn foreign currency for the country, because they have not come up with initiatives to support soya bean and sunflower farmers, yet they have been huge beneficiaries of foreign currency from the Government. They should not be selective in their supply of products to retailers and wholesalers, as the same products find their way onto the black market at exorbitant prices.
Instead of playing the blame game, we should be putting our heads together and find ways of domesticating raw materials and work towards beneficiation, and reduce pressure on our import bill. In my view oil processors have been protected long enough, and should be able to walk on their own, and support soya bean farming at a larger-scale.
EZ: Now to the two cents per dollar issue!
DM: We admit that it is a noble idea in as far as helping the fiscus is concerned. The Government is alive to the fiscal deficit. It cannot just be wished away. We need to take action, part of which could be painful as the Minister of Finance Prof Mthuli Ncube has indicated. But I think it is the approach that we may use on such impactful issues that needs to be taken into consideration. There is need for wide consultation and engagement, for this is the only way to gauge perceptions and sentiments, suggestions, which helps in coming up with a more refined policy that will easily be accepted by the people, who feel that they have been a part of the process. In that way the shock will be minimised, because our Zimbabwe market is a fragile one, which reacts negatively to any pressures or surprises.
Issues like price controls should not be talked about in a way that may be misinterpreted, or interpreted rightly even, whatever case it may be, because such talk creates uncertainty and a panicky mood. Therefore, before bombarding the market with announcements there is need to put shock absorbers in place through consultative processes to engage, inform and educate the market.
EZ: So are you saying that as stakeholders you have not been engaged by the Government to map a way forward to mitigate the current situation.
DM: No in terms of engagement it’s going on very well and we are happy that through our line ministry, and through the engagement spearheaded by Vice President Chiwenga, we are meeting and our goal is to look at price stabilisation, as well as looking at issues of supply and availability of products.
There is need to locate where the problem could be, which in turn affects pricing. One of the problems that we have is the issue of packaging. Packaging suppliers have been struggling because they do not have forex and without packaging a product cannot be taken to the market. We have called the RBZ to consider packaging as one of the key issues so that resources must be constantly procured. We went to have a tour of Hunyani and they have a massive capacity of packaging across the country as well as Mega Pack, which is persuing the DRC market.
EZ: What is the Confederation of Zimbabwe Retailers doing to curb wanton price increases? Are you in a position to regulate your members?
DM: Basically we use the persuasion method where we engage and articulate issues where sometimes when we engage we also understand why someone is charging high prices. It could be a case of someone trying to take advantage of the current situation, or someone not knowing the impact of such decisions. That is why we are always out there engaging stakeholders in the industry for purposes of appreciating variances. From those platforms we will be able to pick price variances. The only way to regulate is to pump as much product as we can into the industry.
EZ: So what is your stance on SI 122 of 2017 in as far as restocking and retooling is concerned?
DM: I think it is quite commendable in so far as it complements Government’s efforts to revive local industries. However, I feel that it is a double edged sword, because on one end it is serving its purpose of trying to protect industry, but on the other hand we need to look beyond that and have policies that are long term. Policies that are not taken advantage of because of their protectionist and short-term nature. Industry needs to retool and be competitive instead of remaining a cry-baby that requires handling in woollen gloves. There should be a shift towards increasing exports to earn foreign currency, and move with technological trends.
EZ: As retailers what is your appeal to the people of Zimbabwe?
DM: People must stop panicking and stop hoarding, because this creates unnecessary pressure on retailers and manufacturers. We do not want a situation whereby manufacturers bring in products and they run out quickly, just like on fuel. When people panic they buy more fuel than they need and they store some of it at home; and we are creating problems for ourselves. There is no need at all to panic. People should buy what they require and not be driven by rumour.