Price stability being restored. . . Speculators toface disciplinary action
THE market should expect significant restoration of stability in the pricing of basic
goods in response to comprehensive Government measures while disciplinary action will
be swiftly meted against businesses that fuel exchange volatility by dipping their hands
in the parallel market, Reserve Bank of Zimbabwe (RBZ) Governor, Dr John Mangudya,
said yesterday.
His response comes on the back of a widespread consumer outcry over the recent spate of
ridiculous speculative price increases, which are being driven by wild parallel market
rates.
The prevailing exchange instability has prompted Government to adopt a raft of
interventions geared at stabilising the economy by consolidating the fiscal and monetary
policy gains achieved so far under the Second Republic.
Reserve Bank of Zimbabwe (RBZ)
The measures are expected to restore income value and consumer purchasing power,
which is critical in sustaining a sound economic base.
Authorities admit the resurgent currency volatility is piling enormous pressure on the
exchange rate, as the skewed preferences for forex usage have continued to increase the
velocity of the Zimbabwe dollar.
Based on the latest price increases and using the Consumer Council of Zimbabwe indices
guidelines on prices of basic goods, our news crew established that the cost of living for a
family of six now hovers around $521 068 per month excluding transport, rentals, bills,
and school fees.
Last month ZimStat indicated that the cost of living had risen by 11 percent to $198 264
for a family of six ($33 044 per individual) in April from $29,778 per individual in March.
ZimStats
The phenomenon has seen a growing US-dollar cash economy, which now accounts for
almost 80 percent of transactions, according to official statistics.
Among the top measures to restore stability is the suspension of duty on the importation
of basic goods, 100 percent retention on domestic sales in foreign currency starting this
month, and fine-tuning the Foreign Exchange Auction System, among others. The RBZ
has already started the pre-announcement of an envelope of $15 million allocation at the
forex auction, which is expected to stabilise the exchange rate.
Dr Mangudya said these measures are expected to yield the desired market in the short
term, with positive responses possibly by the end of this month.
In particular, he said the monetary policy measures would tame exchange volatility to a
level in which the gap between official, which is hovering around US$1: ZWL$1 404, and
parallel market rates of above US$1: ZWL$ 2 500, will be narrowed.
“As announced last week, beginning tomorrow (today) the auction system will start
using a pre-announced envelope on a pure Dutch auction basis. What it means is, when
bids reach US$15 million, no more money will be allocated. By doing so we are reducing
the premium in the market,” said Dr Mangudya.
“Our expectations are that there will be a narrowing of the official exchange range and
the parallel market rates due to the refinement of the auction system. Therefore, by the
end of the month, consumers should expect to witness a modicum of stability in prices of
basic commodities.”
Money– Image taken from Pixabay
Economists have been calling on the central bank to fine-tune the auction system
stressing the need for the platform to be effective and efficient so that it continues to
benefit the productive sector.
Dr Mangudya said the opening up of the importation of certain basic commodities will
have a huge bearing on the prices locally. He warned errant businesses that are accessing
foreign currency from the auction system, but then spin the forex in the black market
with the sole aim of purchasing some products using the local currency for resale in the
black market at exorbitant US dollars.
Tough measures are being taken to drastically reduce the black-market rates as the
goods will be available at far reasonable prices, he added.
“Some wholesalers are accessing forex in the auction system and order goods in
neighbouring countries to sell at exorbitant prices.
“For instance, it won’t make sense for wholesalers to buy an item for US$70 in
neighbouring countries with the intention of selling at US$150 when the same
commodity is sold for, say, US$75,” said Dr Mangudya.
“What we are simply doing is check-mating products and in the process protecting
consumers.”
In addition to milk powder and washing powder, the Government’s list of duty-free
imports includes basics such as maize meal, rice, milk, flour, salt, cooking oil, sugar,
petroleum jelly, toothpaste, bath soap, and washing soap.
“We have been there before and we do not want to go that path again. Dollarisation
benefits are short-lived, and it will leave us very uncompetitive in the region,” said Dr
Mangudya.
“All the measures announced and implemented are meant to instil confidence in the
market.”
Dr Mthokozisi Nkosi
Dr Mangudya reiterated that serious action will be taken against entities found
manipulating the exchange rate and castigated unscrupulous traders, mainly in the
informal sector, for demanding payment for goods and services exclusively in foreign
currency, a practice that violates the dual currency regulations and is leading to artificial
shortages of some items in shops.
Consumer Protection Commission chairperson, Dr Mthokozisi Nkosi, said last week’s
Cabinet concern over price escalation, his unit was also seized with the matter and was workingwithrelevant arms of Government to address the situation.
“We have discovered that if you go to the smaller shops the products are readily available
but the unfortunate thing is they sell in US$,” he said.
“But when you verify and get the same product from the established retail outlets, prices
are a bit high because they tell you that we are using an official exchange rate, but you
find that they have increased prices in US$ components and convert using a smaller rate.
“In our view, they just want to tweak our minds from the authority perspective. That is
why we are trying to investigate by engaging the retail associations themselves and
trying to see if we can get a common ground.”
Dr Nkosi said Government was unhappy with the market indiscipline and warned that
drastic action to punish the offenders will be taken.
“So, the message out there could be, yes some have done it, we have sent our message
out there, some are now complying, stabilising a bid but the fact remains, we are not
happy as we think that it’s highly unjustifiable, we expect them to do the right thing,” he
said.
Mr Comfort Muchekeza
“We are actually working in the background through our arms of Government to make
sure that at least sanity prevails, we can’t have our consumers suffering day in and day
out.”
Consumer Council of Zimbabwe’s southern region manager, Mr Comfort Muchekeza, said
the situation around prices has pushed consumers to the end.
“The issue is not on the rising prices, but on exchange rates. You find out that prices are
mainly rising in local currency as businesses chase the rate,” he said.
“You find out that a 10kg of mealie-meal is going for $27 000 and a kilogramme of beef
going for $47 000 as some retail shops peg their rate at US$1: $5 500. We, therefore, call
upon the authorities to find a way to work on issues of exchange rates so that businesses
can sell their goods using the formal exchange rates with the 10 percent forward pricing,
which was allowed by the Government.”-The Chronicle
