Crack whip on errant businesses
GOVERNMENT has repeatedly called on business to be disciplined but the call has mostly fallen on deaf ears as market indiscipline has taken route.
Sadly as a result, we have seen in some cases prices escalating by over 100 percent. The price hikes incidentally occurred soon after the inauguration of President Mnangagwa.
This incredible coincidence raises serious concerns over its rationale.
For example, after PPC invested in a $82 million brand new plant to provide additional capacity, not only to meet local demand but also feed into the export market, cement prices have sharply increased from $10 up to $19 per bag.
In the same vein, there are rampant illegal dealings in the money market.
One doesn’t need to be a rocket scientist to realise that business is playing politics!
On that basis, Government must crack the whip to deal with the two evils of unfair trading practices and illegal dealings in the foreign exchange market.
These two evils are playing a key role in pushing prices upwards. The unfair trading practices and illegal dealings in foreign exchange requires the attention of the Competition and Tariff Commission (CTC) and Reserve Bank of Zimbabwe (RBZ).
The CTC must enforce its Competition Act, especially the section on restrictive practices. Some of the statutory functions of the Commission, in terms of Section 5 of the Competition Act [Chapter 14:28], are to encourage and promote competition in all sectors of the economy; to investigate, discourage and prevent restrictive practices; to investigate unfair trade practices and the provision of assistance or protection to local industry and to monitor prices, costs and profits in any industry or business that the Minister of Industry, Commerce and Enterprise Development directs the Commission to monitor, and to report its findings to the Minister.
The CTC has instruments at its disposal to deal with the rampant price hikes and of course, price collusion.
There is no logical explanation on why companies are selling the same product at the same price when they have different cost structures and business models. This can only be price fixing, which is illegal.
CTC must act on this menace as soon as yesterday. However, in order to make the CTC more effective, there is need to strengthen its capacity in terms of resources.
The Commission could also review its penalties upwards.
The central bank is also empowered under the RBZ Act to regulate the issuance of banknotes and coins; to provide for matters connected with banking, currencies, monetary policy and coinage; and to provide for the supervision of banking institutions or money-related activities.
In this regard, the RBZ has a number of instruments at its disposal to deal with illegal trade of money.
The Banking Act, Bank Use Promotion Act, the Exchange Control Act and the Reserve Bank of Zimbabwe (RBZ) Act are some of the instruments under the purview of the RBZ. These can be used to deal with errant businesses.
For example, Section 11 of the Bank Use Promotion and Suppression of Money Laundering Act (Chapter 24) requires all traders and parastatals to bank their money at the close of business.
To deal with the market indiscipline once and for all, law enforcement agencies, together with the RBZ, must join hands to deal with money changers. Business who are not complying with the law must be brought to book.
We cannot look the other way as people change money on the streets and some refuse to bank it. Dr Mugano is an author and expert in Trade and International Finance. He has successfully supervised four Doctorate candidates in the field of Trade and International finance, published over twenty – five articles and book chapters in peer reviewed journals. He is a Research Associate at Nelson Mandela University, Registrar at Zimbabwe Ezekiel Guti University and Director at Africa Economic Development Strategies. This article was extracted from Dr Mugano’s upcoming Book titled “Trade liberalisation Paradox: How Africa Must Respond”. Feedback: Cell: +263 772 541 209. Email: gmugano@ gmail.com