Prices spike despite Government directives
HARARE — A fresh wave of price hikes has hit hard pressed Zimbabweans, despite the raft of new policy steps that the government has taken over the past few months, effectively depleting their disposable income, Business Times can report.
This could be a result of a plunge in the value of the local currency, the Zimbabwe Gold (ZiG).
In a survey conducted by Business Times this week, retailers have deliberately flouted the official bank rate to survive the depreciation of the gold backed currency. The value of ZiG has plunged by 44% to ZiG23 per US$1 from ZiG16: US$1 on the parallel market, which most businesses are using to price their products.
Retailers have argued that the interbank exchange rate continues to be manipulated by the Reserve Bank of Zimbabwe (RBZ) and does not reflect the true value of the ZiG on the ground hence shops have increased the prices in tandem with the parallel market rate.
According to the snap survey, most formal businesses are displaying ZiG14.70 per US$1 for the fear of Financial Intelligence Unit (FIU) offensive but their ZiG pricing shows that they are charging above ZiG21 per US$1.
A 2 kg of Mahatma is now selling at ZiG48.10 from ZiG44 a fortnight ago while the price of a 2kg of flour has gone up to ZiG38 from ZiG34.50, two weeks ago.
Multi-grain mealie-meal is now selling at ZiG210 from ZiG203, while white roller meal is pegged at ZiG113 from ZiG108.50
An executive at a Harare-based retail outlet who commented on condition of anonymity told this publication that the formal businesses had little choice but to raise prices in order to remain in business.
“We are back to where we were five months ago. The disparity between the official rate and parallel market is now close to 50% and the official rate has remained stagnant and controlled while the parallel market is rampant amid the recent release of the ZiG into the market,” he said.
“The situation is unattainable in the sense that the FIU is on our back doing price controls in ZiG with the local currency elusive despite the increasing parallel market rate. The danger of these guerilla tactics is that there will be serious shortages of goods in formal shops as the fiscus won’t get the revenue it intends to collect due to reduced sales in the formal market,” he added.
N.Richards manager Archford Dongo said the increase in prices was a result of forex shortages.
“The increase in prices is simply a result of limited forex on the formal market which is forcing the manufacturers to supply goods at a premium to source forex on the alternative market in an effort to procure raw materials. With the goods supplied at a premium, the retailers put a markup to survive,” Dongo said.
Dr. Prosper Chitambara, an economist, stated that companies are sourcing foreign currency from the underground market, where premiums are punitive, as a result of shortages on the official market.
“It seems that there are no willing sellers of foreign exchange to meet the high number of willing buyers on the formal market. This means a lot of business are having to seek recourse to the parallel market to get foreign exchange and this explains the depreciation of the ZiG due to the strong demand for the US$ which is not matched by the supply on the official market. This is basically the mismatch between the forex and available supply on the formal market,” Dr Chitambara said.
This week, Cabinet, warned retailers and some manufacturers that are using the unofficial exchange rate in their operations. _*— BusinessTimes*_
