Golden Sibanda Senior Business Reporter
Zimbabwe’s two major business member groups say price increases witnessed recently across a range of basic goods are largely seasonal but other increases for non-basic goods can be a result of forex shortages.
However, officially opening the First Session of the Ninth Parliament on Tuesday, incorporating the State of the Nation Address, President Mnangagwa said Government had secured $500 million to ameliorate forex shortages for business and individuals in general and was committed to redress fiscal imbalances. Disbursements will start this week.
Poor economic performance, following a decade of downward spiral up to 2008, the impact of sanctions and low foreign investment and exports have resulted in a serious shortage of hard currency while a mismatch between revenue and public expenditures spawned deficits, which Government bridges through Treasury Bills.
But president of Zimbabwe’s single largest industrial manufacturing representative organisation — Confederation of Zimbabwe Industries (CZI) — Sifelani Jabangwe, said the increases mostly on prices of basic goods such as mealie-meal, meat, soap, toiletries, rice, sugar, vegetables and poultry products, were only seasonal.
The cost of building materials, such as cement and bricks, also vaulted in recent weeks.
Mr Jabangwe told The Herald Business in an interview this week that only producers of basic commodities had access to adequate foreign currency needed for production processes; the majority have to rely on foraging on the parallel markets.
“What we now need to do is for Government to use appropriate tools to deal with this and we move forward. Others may be in a panic, we are not. . . we are not in a spiral.
“It is what happens around this time. Also, this is the time we are preparing for the summer crop and need to import a lot of fertilisers, crop inputs and chemicals, which we are not producing,” Mr Jabangwe said.
Around this time last year, the country went through similar experiences.
The CZI president said past trends indicated that prices normally start creeping up in September after the end of the tobacco marketing season, when the flow and availability of foreign currency drops to critical levels and an alternative source of forex is needed.
Tobacco is Zimbabwe’s single largest export earner, generating over half a billion in annual export receipts, which the country requires for importation of essential things like fuel, medicine, machinery and raw materials.
The marketing season stretches between March and July.
“It is an economic cycle, we must not try and over dramatise it. What does this period align with? It aligns with the end of the tobacco selling season. If there had been $80 000, let us assume, of foreign currency coming into the market and $30 000 of that is no longer coming and we now have $50 000, what happens? It means that we now have a shortage.
“It’s an economic cycle where the tobacco season has come to an end and there is inadequate foreign currency coming into the market and this period stretches from now until March next year, but it’s much worse between now and December because in January we are all broke, but before then people are stocking up for Christmas,” Mr Jabangwe said.
The CZI boss said during the period of acute shortages, everyone scrambled for the little available hard currency, which has sent rates on the black market sky-rocketing, the cost of which is priced in products. He said the situation was a problem only the Government could resolve by injecting the needed forex to take the country through the dry patch.
Zimbabwe National Chamber of Commerce (ZNCC) chief executive Chris Takunda Mugaga said the major problem was the informal economy where information asymmetry led to wild increases in exchange rates on the black market and fiscal imbalances, which created disparities between US dollar and RTGS balances value.
“What happens in an informal economy is that there is no correct information like in the formal market where for example CBZ Bank can assess rates overnight.
“But what happens on informal markets for forex causes information asymmetry, which is the breeding ground for arbitrage.
“As such, you cannot escape inflationary threats like what we are having. So what is causing rates and price increases are fiscal imbalances both fiscal and monetary level where everyone acknowledges that RTGS money is no longer of equal value to physical US dollar it means when you go into a shop to buy you cannot by on a 1to1 basis.”
Zimbabwe’s year-on-year inflation rate (annual percentage change) for the month of August 2018 as measured by the all items Consumer Price Index (CPI) stood at 4,83 percent, gaining 0,54 percentage points on the July 2018 rate of 4,29 percent
Mr Mugaga also said untimed statements from public officials also had the effect of driving inflationary pressures, as business operators start pricing the perceived impact of certain pronouncements in goods and services.
The ZNCC CEO said that Zimbabwe was also constantly under inflationary pressures stemming from steep currency premiums due to its reliance on imports on the back of sluggish production in its industries.