Augustine Mukaro
16 February 2007
MASSIVE price escalations are looming for virtually all basic goods and services as government hurtles to scrap subsidies from most essential commodities.
The scrapping of subsidies, set to trigger a wave of fresh price increases across the board, is reportedly meant to remove pricing distortions cited by Reserve Bank governor Gideon Gono in his monetary policy statement two weeks ago.
Government this week increased the selling price of maize from the Grain Marketing Board (GMB) to millers by over 9 500% in a move that will push the price of the staple maize-meal to unaffordable levels. The price of maize to millers jumped from $600/tonne to $58 000 on Wednesday.
The GMB also silently removed subsidies on wheat, forcing millers to raise a 50kg bag of flour from $12 000 to $33 000 two weeks ago. The increase resulted in bakers demanding an increase in the price of bread from the current $825 to $1 800.
Government has in recent weeks arrested businessmen for increasing prices of goods without approval.
The double-dealing exposes confusion and lack of a policy framework to deal with the economic meltdown the country is experiencing.
Previously, government was buying maize from farmers at $52 500/tonne, and selling it to the millers for $600/tonne.
Millers projected that a 10kg bag of mealie-meal, currently priced at $800, would jump to around $4 000.
Earlier in the week transport operators warned commuters to brace themselves for a sharp increase in transport costs as government had agreed in principle to a fare hike following the removal of subsidies on fuel.
Fuel on the black market is ranging between $4 500 and $5 000 per litre while government was selling it to transporters and farmers at $330. Operators are proposing fares that cushion them against the ever-rising fuel prices and spare parts.
A trip into town from Chitungwiza, currently pegged at $2 000, would rise to $5 000, while fares for shorter distances such as Houghton Park and Glen Norah to town currently at $1 500, would go up to $4 000.
Gono said the distortions had created a haven of corruption as millers and other unscrupulous businessmen made mountains of wealth through re-trading the same grain obtained from the GMB whilst farmers found it more profitable to trade fuel on the parallel market instead of producing crops.
Observers said the lifting of subsidies would soon be extended to other utilities and services provided by parastatals where there have been startling unsustainable price distortions. The scrapping of subsidies is anticipated to push up prices of virtually everything.
Gono blamed the lower-than-cost-of-service-delivery pricing in the municipalities and other public utilities for crippling the economy. He said the parastatals were to be allowed to operate within parameters that make economic sense.
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