Irate Zanu PF chefs quiz minister over price riot

PANICKY Zanu PF bigwigs this week summoned Industry and Commerce minister Sekai Nzenza (pictured) to explain waves of price hikes that have hit the country, especially this month, the Zimbabwe Independent can report.

e Zimbabwe dollar has crashed hard this month, by 25,5% on Tuesday this week alone and 34% overall this month, leading to price spikes that have shaken ruling party officials fearful of election reprisals.

Results of a probe, commissioned by government ahead of Nzenza’s meeting with Zanu PF, revealed that rocketing costs were being triggered by currency depreciation, which “induced a shock in the rate of inflation as firms index prices in US dollars”.

It said prevailing lower prices in the informal sector were underpinned by local manufacturers’ decision to give discounts for US dollar transactions, as well as attractive trading terms in greenback cash purchases when compared to Zimdollar deals.

e study, carried out by three commissions, also said suppliers of basic commodities were charging higher Zimbabwe

dollar prices to formal retailers because the currency was depreciating constantly.

e Competition and Tariff Commission, the Consumer Protection Commission and the National Competitive Commission also slammed government’s recent move to open Zimbabwe to foreign basic commodities, warning that this could hurt domestic industries.

Concern over price hikes took a political tone as the ruling party tries to demonstrate that it has capacity to address the crisis ahead of elections expected in August.

Nzenza confirmed that she appeared before a panel of Zanu PF’s policy and administration committee, which is chaired by secretary for administration Obert Mpofu.

“e Zanu PF policy and administration committee, chaired by Dr Obert Mpofu, summoned me to present on what is happening on the prices,” Nzenza told the Independent.

“I gave them a full report based on three weeks of monitoring 14 basic commodities, then told them that I was in dialogue with the private sector, the Reserve Bank (of Zimbabwe) and Ministry of Finance (and

economic Development) to find a solution so all stakeholder concerns are addressed.”

The currency has been in free fall since last year, depreciating from uS$1:ZW$750 on the parallel market in october to uS$1:ZW$4 000.

The crisis has reversed a positive trajectory previously experienced in industries for the past five years.

Industrial capacity utilisation was below 40% before Covid-19, but rose to 55% currently, while locally produced commodities on supermarket shelves moved from 37 % in May 2020 to the current 81%.

In a report submitted to government on tuesday, the Confederation of Zimbabwe Industries (CZI) painted a gloomy picture, before demanding action.

“Limit importation of basic commodities to households only for domestic use (prescribed monthly quantities),” the CZI said.

“Government should establish processing capacity at Grain Marketing Board silos to produce basic commodities for the targeted vulnerable households. Government should provide food stamps to the vulnerable households.

“Cooking oil purchases by household should be limited to two bottles (four litres) per customer. While the new measures take effect to allow a smooth transition to policy measures desired impact, we recommend that business be allowed to charge at willing-buyer willingseller +50% to remove formal/informal pricing distortions. This will allow manufacturers to supply to formal retailers on credit.”

The CZI added: “The informal sector sells products mainly in uS dollar, and some of the shops are totally rejecting the local currency. They buy commodities from manufacturers at the official rate and sell very cheap in uS dollars.

“Shrinking formal sector consumers are making a run-on stock (priced in Zimbabwe dollars in formal shops, taking advantage of the exchange rate disparities and formal shops are failing to restock.

“Manufacturers are demanding cash upfront which also affects restocking,” it said.

Zanu PF has accused business of advancing a regime change agenda.

In their report, the three commissions agreed with the CZI’s insights and recommended that government must liberalise the exchange rate and allow market forces to determine prices.

“The price increase was huge in May when the local currency depreciated by 34%, indicating that the price increase was exchange rate induced,” the commissions said in the report, before warning against the implications of a blended inflation introduced in February, on the economy.

“The blended inflation index does not give an accurate position on inflation since the formal sector uses local currency to price products. It, therefore, forces suppliers to charge a higher Zimbabwe dollar price to formal retailers given that it is depreciating every week both on the official and parallel market.

“There is strong evidence of smuggling of some basic commodities such as toothpaste, washing powder and bathing soap into the country. These products are finding their way into the informal market,” the report reads.

The report further noted that current liberalisation on imports of basic commodities will further strengthen price stabilisation for basic commodities in uS dollar terms in the informal sector.

“Removal of duty and licences on imports of basic commodities will harm the local industry, particularly those producing maize meal, toothpaste, and washing powder,” it reads.