Pressure mounts on retailers to review prices

MANUFACTURERS and retailers are under increased pressure to downwardly review prices of goods and services, as fuel prices continue retreating and inflationary pressures subside followed by a series of measures by the Government to tame inflation and rein in indiscipline in the market.

Petrol and diesel prices have declined to US$1,57 and US$1,74 per litre, respectively, from US$1,73 and US$1,76 in June.

Fuel prices have been increasing since February as a result of the Russia-Ukraine conflict.

However, the Government responded by releasing reserves and increasing the blending ratio to keep prices below US$2 per litre.

At US$1,57 per litre, petrol is now only US$0,06 pricier than in March.

The exchange rate volatility, which was directly affecting prices of basic commodities as producers and retailers were using parallel market rates, has also been contained.

Consumer Protection Commission (CPC) chairperson Dr Mthokozisi Nkosi said consumers should begin to feel effects of measures taken by the Government.

“In our engagement with business, they said the cost of fuel is forcing them to increase prices as transport is a key element of most operations,” said Dr Nkosi.

He said businesses appear to have adopted a wait-and-see approach, where they take too long to respond to changes in the market.

“I think in this case, the evidence is there for all to see. Fuel prices are going down. What we expect to see as a consumer voice is proportionate reduction of prices of goods and services.”

The Government, he said, is doing all it can to lessen the burden for consumers.

“We don’t want a situation where the Government enters the market because businesses are not playing fair. We don’t want to design instruments that will force businesses to be responsive. The Government is playing its part in line with the National Development Strategy 1.”

Parallel market rates have not only stabilised, but retreated in some instances.

While US$1 had previously been changing hands at $800, it has declined to as slow as $700, as the Zimbabwe dollar has become scarce.

Finance and Economic Development Deputy Minister Clement Chiduwa on Thursday told Senate last week that fundamentals for a stable exchange rate are in place but indiscipline has been wreaking havoc.

“If we look at the situation from November to December 2018, as Government, we resolved not to borrow from the RBZ. There was no recourse from the RBZ, which is a situation in the past that was contributing to the escalation of prices. We know that our nation is under sanctions and we decided to live within our means,” he said.

“This shows that there is economic speculation, which is the major problem, because there are people who believe that trading in foreign currency is a business that they should be seized with. But as a nation we are supposed to produce goods and services . . . so the biggest challenge is the parallel market.”

Monetary authorities recently hiked interest rates to 200 percent to deter individuals and corporates who were borrowing for speculative purposes.

The recent introduction of gold coins as an alternative store of value and investment instrument has also mopped up about $4 billion from the market.

Economists believe that prices in retail outlets should have softened by now in sympathy with fuel prices and a stable exchange rate. Reserve Bank of Zimbabwe (RBZ)’s Monetary Policy Committee (MPC) member Mr Persistence Gwanyanya said prices should react to new market conditions.

“Definitely, there must be a drop because if prices are not competitive, then there is no business. We are likely to see stability in the exchange rate because of measures put in place by Government,” he said.

Perfect conditions

Confederation of Zimbabwe Industries (CZI) president Mr Kurai Matsheza said businesses were likely to react differently depending on their peculiar cost structures.

“That global oil prices are coming down, and to have Zimbabwean fuel prices following the same trend, is a welcome development for business in general and all consumers,” he said.

“The cost structures of each business is different and a decline in one cost element may not translate into a total cost reduction. Thus, each business will act on their product or service pricing guided by overall cost structure movement.”

Reduction in fuel prices and exchange rate stability, he added, provide perfect conditions for growth.

“These developments are welcome by business and we hope the trend will sustain over the long haul.

“If they sustain, which is what industry desires, then this will be good for business, consumers and, most importantly, the economy,” he said.

The Government has since made the undertaking to vet all invoices from suppliers after observing a disturbing tendency to overprice and index to parallel market rates.

The public sector accounts for over 70 percent of purchases in the economy.

All future payments to contractors will now be subject to intense scrutiny.

Overall, prices of basic commodities have been stable over the past month, and there are expectations they could be further reviewed downwards.