29 June 2017

Zimbabwe: 'Forex Dealers Fueling Price Hikes'

The premium charged by dealers on foreign currency sold to importers on the black market is the key driver of increases in the prices of most basic commodities, a study by the National Competitiveness Commission has concluded.

The findings of the survey by NCC, the successor body to the National Pricing and Incomes Commission, said this comes against delays encountered by would be importers in securing foreign currency from the Reserve Bank of Zimbabwe.

NCC said Government should expedite disbursement of foreign currency for import of raw materials needed for the manufacture of basic commodities, as part of measures to arrest potential food shortages and price hikes.

"The Commission attributes the price increases mainly to the 10 percent to 15 percent price increases by producers to circumvent foreign payment delays, which is caused by foreign currency shortages," the commission said.

"The Government should try to address these problems in order to facilitate the reduction of prices in retail shops, but as long as foreign exchange payments are still there retailers will continue to capitalise on that.

"And on SI26A, the Government should enforce that legal instrument in order to caution consumers from the extortionist behaviour of some retailers who do not want to reduce prices of listed goods," NCC said in a last week.

The survey undertaken by the commission showed price increases by retailers of between 10 and 40 percent for mealie-meal, rice, powdered milk, peanut butter, washing powder, lotions, cooking oil, beef and chicken.

The price of a 10 kilogramme bag of Red Seal roller meal jumped 18,2 percent to $6,31 in the six months to June 2017 from $5,34 in the comparative period a year ago. The price of a 2kg bag of Gloria self-raising flour increased by 20, 7 percent.

The price for a kg of blade meat rose more than 20 percent. Commenting on the issue, economist Dr Gift Mugano said: "It is hardly surprising that the same retailers that were arbitrarily raising prices during the hyper-inflationary era are the same retailers guilty of the same offence now.

"There is need to strike a balance between enforcing legal instruments like SI 26A and provision of foreign currency, as some unscrupulous dealers are waiting for a robust enforcement to empty their shelves and even create a bigger problem."

For rice varieties such as, Mariana and Mahatma rice, prices spiked 24 percent and 20 percent from $2,35 to $2,93 and from $1,71 to $2,05, respectively.

Sachets of Sunlight and Omo washing powders "recorded huge price increases of around 30 percent between the two periods". But prices of other products declined.

Prices of products such as Campha Care (skin product), Jade (bathing soap) and Dendairy milk fell by between 16 percent and 18 percent in the review period.

Overall, NCC observed that prices have been increasing since November 2016 -- coincidentally the same month bond notes were rolled out in the market.

This, market watchers say, might be a possible indication of the arbitrage (taking advantage of different prices and sentiment) that is obtaining in the market.

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