Rising prices hit the poor hardest

17 Nov, 2017 - 00:11 0 Views
Rising prices hit the poor hardest Price hikes have become the order of the day

The Herald

Price hikes have become the order of the day

Price hikes have become the order of the day

Tatenda Charamba & Runyararo Muzavazi
It’s getting more expensive to be poor. Over the past few months, prices have risen more quickly for many of the things that low-income households spend a lot of their money on, such as basic food commodities, services and other critical needs such as clothing and farm inputs.Prices of some building materials required by the poor have also gone up.

As a result, these households — families earning less than $200 are experiencing a higher rate of inflation. Even the majority of workers earning above this amount are feeling the pinch as salaries have remained stagnant despite a sharp rise in prices in recent months. The Government has been battling to avert supply gaps and end price hikes. Early this month, the Government announced that it was going to import agricultural inputs directly from the international manufacturers to keep input prices at reasonable prices.

In addition, it said it was going to ease import controls on a range of basic commodities to ensure adequate supply of products ahead of the festive season. The relaxation of import control has evoked mixed reactions among consumers and retailers. One retailer who decided to remain anonymous says he feels indifferent.

“As a retailer, I don’t see any difference because this is how it has always been. Never in my life have I been consulted on issues that affect my business,” said a retailer in downtown Harare. We only follow directives from Government, even when they declared the bond notes and US dollars, we had no say. So relax or not, it’s the same.” Another retailer said easing of import controls will not solve the problem.

“The reason why prices are hiking on a daily basis is because of the scarcity of foreign currency,” she said on condition of anonymity.
“Local manufacturers need input from other countries so the issue of price hikes cannot be completely eliminated by easing import controls.” She said fear of making loses has led to use of the four-tier system.

“Retailers end up using different payment systems because they fear making loses,” she said. The four-tier system include – EcoCash, Bond notes, US dollars and RTGS. Prices in US dollars are usually lower compared to the other forms of payment. EcoCash attracts charges of up to 40 percent or more while for RTGS charges have hit up to 60 percent. Farm inputs, one hardware retailer said, are in short supply and once demand goes up, price will go up beyond prescribed rates. Those who will import the imports using free funds were likely to pass the cost to the consumers. Mrs Gladys Chaitezvi said she was looking forward to a positive change.

“The last part of this year has been bad to every poor household in Zimbabwe. We have always known that buying groceries and properties locally is expensive but we had somehow found a way to adjust,” she said.

“In the past few months, we got the shock of our lives when prices of most basic commodities shot up. We were caught unaware. This is bad and it’s coming at a time when we need to be buying groceries for the festive season. I’m not sure if prices will stabilise with the coming of imports.” Prominent University of Zimbabwe economist, Prof Albert Makochekanwa said import controls have nothing to do with prices but rather availability of products.

“For the easing of import controls to solve the issue of price hikes I doubt because the only obvious benefit from this initiative is flooding of commodities in our various retail shops,” he said.

“Generally Zimbabweans believe that products have to be expensive whether they are in short supply or not because we calculate the resources used when producing or obtaining products.” Prof Makochekanwa feels the payment systems used in the country are to blame for the price hikes.

“Having a four-tier system of payment has led to price increases on a daily basis, which Government should try sort out for the prices to decrease when the shelves are flooded with products. Rating of forms of payment makes life difficult for the citizens considering that banks are not offering much cash. At the end of the day you buy less than 10 basic commodities with a $50 note because of the rates,” he said.

The UZ economist suggested that: “We need to create strong relationships with our customers first before thinking of easing import controls. Consumers nowadays no longer care about our pricing philosophy and our competitiveness as they always find a way to smuggle products or buy at a cheap price with foreign currency from cross border traders.

“We are not going to force people to buy our products, but have to strive to meet best practices and that way, the market will stabilise.” Industry and Commerce Minister Dr Mike Bimha assured local manufacturers about the easing of import controls.

“Government is not repealing SI 64 but implementing it. The Government has planned to flood the market to avert shortages and suppress price hikes during the festive season. We have always clarified that SI 64 (of 2016) is not a ban but a restriction on imports. We cannot import when we are producing enough goods for the country and the same can be said on shortages, we cannot have empty shelves during the Christmas period because we do not want imports. What this means is that when there is a shortage due to foreign currency deficiencies, we allow those with free funds to import basic commodities and my Ministry is ready to process permits and licences to that effect,” said Dr Bimha.

To ease the price hikes Government earlier this month warned retailers and manufactures that they were at risk of having their operating licences revoked if they are found guilty of waving unjustified price increases. And it seems, there is no easy answer to a sweeping increase of prices across the Zimbabwean market. While the Government and the business sector debate about the relaxation of import controls, the poor remain the hardest hit in terms of price increases.

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