Prices of building materials in Zimbabwe are expected to remain low for the first quarter as the depressed market is changing the pricing system.
BY TATIRA ZWINOIRA
This comes as the peak season in the construction industry between July and December experienced price reductions characterised by a number of discounts-based promotions that are temporary in nature.
Speaking to NewsDay yesterday, Turnall managing director Caleb Musodza said market affordability was being affected by the current depressed market.
“Profitability now tends to be driven more from a cost base management perspective, particularly on labour productivity and raw materials. It’s not bad that the prices may have come down as long as the industry remains profitable. Lower prices help in stimulating demand and hence it is good for the industry,” Musodza said.
“Building material pricing are a function of target market affordability, competitor activities and profitability targets. Due to the current depressed market activity in Zimbabwe, market affordability and competitor activities have more influence in the pricing decision matrix.”
He said a decline in pricing does not necessarily indicate a decline in margins or profitability as entities in the industry have leveraged on successes in their own cost-reduction initiatives to offer lower prices to the market without reducing their margins or compromising profitability.
“If a company has significant South African-based cost elements in its value chain, it can lower its pricing level by deploying all/part of the savings in the rand depreciation directly to offer a lower pricing. The same reasoning can be done on any savings on raw mats sourcing, labour costs and productivity,” Musodza said.
In the third quarter report on the building material prices index for 2015, Zimstats noted that the index decreased by -1,1% between June 2015 and September 2015. Major decreases were observed in metal windows and door frames and bricks with changes of -5, 9% and -5, 4% respectively.
The Building Materials Price Index decreased by -0,5% between September 2014 and September 2015. Major decreases were observed in sanitary ware and plumbing, cement aggregates and allied materials and metal windows and door frames with changes of -9,9%, -7% and -5, 7% respectively.
However, timber and wood products and flooring increased by 6, 3% and 3, 5% respectively.
Some of the building material companies in the country include Lafarge Cement, PPC Zimbabwe, Turnall, Halsted Timbers and Bhola Hardware among others.