Commission raises flag on price hikes:
Survey shows outrageous increases Eggs, milk prices remain flat Beef prices rise the most
THE National Competitiveness Commission (NCC) - a successor body to the National Incomes and Pricing Commission (NIPC) - has raised the flag on astronomical price hikes for basic commodities, especially in the three-month period to February 2017, raising fears local consumers are being exposed to inefficient local manufacturers.
However, the Commission says rising prices which became noticeable in November 2016 – coincidentally the same month bond notes were rolled out to the market - could have been caused by rising fuel prices and the need by retailers “to cushion against foreign payment delays” to suppliers.
The price survey, which was conducted between June 2016 and February 2017, show that beef, flour and mealie meal prices increased the most in the three months to February, while egg prices actually dropped. Milk prices were, however, flat. Interestingly, a 10 kg bag of the Red Seal Roller Meal brand, which is produced by National Foods, rose 9,4 percent from US$5,73 in November to US$6,27 by February.
Conversely, the same package for the Grain Marketing Board (GMB)-produced Silo Roller Meal fell 3,8 percent to US$5,29.
Blue Ribbon Industries premier Parlenta brand jumped 1,5 percent to US$7,58 in the period.
But it is the behaviour of flour prices for local and imported brands that is particularly worrying. While a 2kg bag of Gloria self-raising flour soared 15,4 percent from US$1,95 in November to US$2,25 in February, the imported brand of Snowflake self-raising flour fell 9,1 percent in the same period.
There were also discrepancies that were observed for cooking oil prices, depending on the brand.
A 2-litre ZimGold bottle bought for US$3,43 in November had declined 0,9 percent to US$3,40 in February, but the Pure Drop brand rose 6,8 percent to US$3,45.
Surface Wilmar manufacturers Pure Drop from soyabeans and Pure Oil - a joint venture between Export Trading Group Tanzania and Parrogate Zimbabwe — produces ZimGold.
The price hikes were so far reaching that even match stick retailers had increased their prices by 8,5 percent to US0,51c by February.
Perhaps the biggest increase was for beef prices, which leapt 37,8 percent to US$7,65 per kg from US$5,55.
Observably, producers and retailers have been upwardly adjusting prices for the past six months. There were fears an additional 15 percent Value Added Tax (Vat) on commodities such as meat, fish, potatoes, rice and margarine that was supposed to take effect on February 1 as a culmination of Statutory Instrument (SI) 20 of 2017, could have burdened consumers even further. The new tax has however been rescinded. “The Commission attributes the price increases to a number of factors such as 10 percent to 15 percent increment from producers to circumvent foreign payment delays, bond note speculation, increase in the price of some raw materials on the global market, fuel price increases, and drought-induced food inflation, and the anticipated strengthening or stabilisation of the rand against the dollar. . .
“Some producers who source their raw materials outside the country have increased their prices by 10 to 15 percent to cushion against foreign payment delays, according to information obtained from the Confederation of Zimbabwe Industries (CZI).
“These producers are facing delays in making foreign payments to suppliers due to increased liquidity constraints facing the country,” said the NCC.
It is believed the price of soap and detergents rose as a result of corresponding increases in the price of Palm Fatty Acid, the major raw material, which rose 58 percent from US$600 to US$900 per tonne.
Fuel prices also rose. Petrol climbed 2,4 percent to US$1,30 per litre in the ninemonth period between January and September from US$1,27 per litre. It also rose 3,08 percent in November. Diesel prices jumped 8,5 percent to US$1,15 per litre in the January to September period. Before the National Income and Pricing Commission (NIPC) was transformed into the National Competitiveness Commission through the gazette of the NCC Bill on September 23 last year, it had expanded powers to rein in unscrupulous retailers, but this unfortunately led to shortages.
Government consequently sheared off the contentious powers and created an entity that is supposed to help the country improve its competitiveness.
Last week, Industry and Commerce Minister Dr Mike Bimha said although Government hasn’t received any reports on price hikes yet, the issue will be looked into.
“I haven’t received any reports yet (about price increases) but it’s something that we need to know the exact information: Which are the issues? Which are the products? Then our people can investigate.
“We want to establish whether the prices are from the issues that Government can act on,” he said.
Confederation of Zimbabwe Industries (CZI) president Mr Busisa Moyo noted that in addition to retailers pricing in the 10 percent to 20 percent premium charged for facilitating timeous and convenient payments to foreign suppliers, the general economic uncertainty was also increasing business costs.
“We need stability, clear strategies and action to instil confidence in the economy. For example, the pending review to align indigenisation laws with the clarifications made by His Excellency (President Mugabe) in April 2016; fiscal expenditure reforms and the issue of the debt overhang resolution; a comprehensive stimulus package for productive sectors.
DURING Muhammadu Buhari’s stint as military ruler of Nigeria in the 1980s, Fela Kuti, a well-known Afrobeat musician, was locked up for the offence of possessing foreign currency, to the tune of £1 600.
More than three decades later Mr Buhari is back in office, elected this time, and the issue of who gets access to foreign currency, and what they can do with it, remains as contentious as ever in Nigeria.
Last November officers of the State Security Service (SSS), the main domestic intelligence agency, arrested money-changers in cities across the country, in what was seen as a response to the tanking value of the naira on Nigeria’s foreign-exchange markets.
The central bank has for months tried to keep the naira stable at about 315 to the dollar, after supposedly floating it last June, but a shortage of foreign currency combined with high demand for dollars has caused the naira to lose as much as 38 percent of its value on the black market since then.
The intervention of the secret police has created in Africa’s second-largest economy “an even blacker (i.e. more secretive) market,” says Pabina Yinkere, a director of Vetiva Capital Management in the commercial capital, Lagos.
The supply of dollars began drying up when the price of oil, Nigeria’s main export, collapsed in 2014.
The problem worsened in 2016 after militants, unhappy with the grinding poverty of Nigeria’s main oil-producing region, started blowing up pipelines.
Nigeria is highly dependent on imports, with everything from the petrol in pumps to the rice in supermarkets coming from abroad.
Importers need foreign currency to pay their invoices, but dollars, pounds and euros are hard to find.
Banks theoretically sell dollars for around 315 naira each.
But few branches have any to sell, or are willing to part with what they have.
Before the intervention of the SSS, dollars could be bought at money-changing bureaus for around 465 naira each.
But with the SSS breathing down their necks, money-changers are now forced to accept no more than 400 naira for each of the few dollars they have.
Many traders have dropped out of the dollar business entirely, says Abubakar Ruma, a leader of a group of currency-exchange operators in the capital, Abuja. Changers cannot make money if they sell greenbacks at the enforced rate. The public has reacted similarly. People with foreign currency prefer to hold on to the bills they have in the hope that the rate will improve.
That has starved the money-changers of cash, and the weekly dollar sales held by the central bank, says Mr Ruma, are not enough to ease the crunch.
The raids by the SSS have not entirely banished the higher rates.
Some money-changers will still buy dollars for 490 naira or above, from people they trust.
What to do?
Higher interest rates would help attract foreign investors.
A negotiated settlement with the militant groups would allow oil production to return to full capacity, bringing Nigeria back to its position as Africa’s largest producer of crude.
Most important, the central bank could also help by being more transparent about the naira’s value.
It claims to have floated the currency back in June, but few believe its value is truly free of interference and the persistence of a black market suggests the opposite.
If investors could be sure of the naira’s stability, they might start bringing in the dollars the country so sorely needs. — The Economist.