The government revealed on Wednesday that they have discovered price hikes of at least 50% in the retail sector despite the panic buying of two weeks ago subsiding. In this interview, NewsDay (ND) business reporter, Tatira Zwinoira speaks to Confederation of Zimbabwe Retailers president, Denford Mutashu (DM) on the reasons behind the price increases.
ND: The Reserve Bank of Zimbabwe (RBZ) said on Wednesday that one of the reasons behind the price increments was due to shop owners wanting to take advantage of the recent panic buying. The panic buying has since subsided, so why are the prices still up?
DM: The price increases are simply a symptom of the underlying challenges of forex shortages in the economy. I acknowledge the rampant market indiscipline in the economy, but it requires restoration of confidence, which is one of the common denominators for economic revival.
ND: What is your organisation doing to address these price increments?
DM: The Confederation of Zimbabwe Retailers is tirelessly working with all stakeholders to ensure that the prices come down and we have since started noticing positive results so far. We are working closely with the Confederation of Zimbabwe Industries, Reserve Bank of Zimbabwe, the ministry of Industry and Commerce and the Consumer Council of Zimbabwe.
One way that we used was to rigorously assure the nation that perceptions on shortages are as wayward as they should be dismissed with the contempt they deserve. We are also working with retailers across the country to make sure prices return to normalcy to avoid price controls from the government. Retailers and wholesalers should act responsibly.
ND: RBZ governor, John Mangudya says consumers must resist these prices by not buying from these shop owners. Is such action possible?
DM: Consumers are rational and the process of making a purchasing decision is influenced by many factors that include disposable incomes, prices, needs, wants and tastes. There is need to solve the economic challenges facing the country without amplifying them. Products like fuel, cooking oil, mealie meal and sugar, among others, are sometimes difficult to resist, as they are very basic. In any case, we need to continuously look at how we can make local products cheaper as compared to the region.
ND: How can consumers resist price increments?
DM: Price is a function of demand and supply in a free market economy. Demand for local products shot up and has not been matched with consistent supply due to a number of factors government is seized with.
ND: Government says prices have increased by at least 50%. Can retailers honestly think that this is sustainable in the long run considering the market?
DM: Any price increase, justified or not, normally reflects a mismatch on supply and demand. The wave of price increases noticed on the market had the shortage of foreign currency and feedstock contributing. The currency black market was also nurtured until it started rearing its ugly head in the economy and got business worried, creating speculative tendencies.
An economy does not run on the parallel market and sanity on that end should be restored. The runners and those supplying them with cash should face the full wrath of the law.
ND: Some consumers have been saying retailers want to profiteer off the dire economic circumstances. What is your opinion?
DM: Consumers are justified in their call for pricing, in this economy, to come down and this is possible if we all show commitment to addressing the structural challenges, ease of doing business, as well as confidence issues.
To solely blame retailers and wholesalers is a disservice. Retailers have received price increases from manufacturers over the past six months and CZR urges suppliers to genuinely address the issue of the supply side since they have enjoyed protection from the government through Statutory Instrument 64 for a long time now.
ND: It seems that the first action of retailers is to pass any external cost on the consumer if they experience any shocks. Do you think in an economy of declining disposable income that those actions are sustainable in the long run?
DM: It is quite natural to pass on the price increases to the consumers, as there are no other ways retailers and wholesalers would absorb the increases. In any case, the rising demand experienced in the economy speaks contrary to declining disposable incomes.
ND: Where do you think retailers need help to make sure they remain profitable and at the same time not inconveniencing consumers?
DM: Retailers require support in ensuring that there is restoration of confidence on the market. The foreign currency shortages in the economy can only be addressed when the country doubles efforts on production while providing the necessary support to sustain the increasing production. Retailers require constant engagement as a critical sector of the economy and work on the mistrust currently prevailing.
ND: What are the main challenges being faced by the sector and what are the solutions?
DM: Some suppliers and manufacturers have been increasing prices over the past six months citing shortage of foreign currency and the cost of procuring forex on the parallel market. The other challenge is the increasing number of informal retailers and wholesalers on the market.
Vendors have also been a menace and the government ought to act fast to provide them with designated vending sites. Certain manufacturers have also revoked the favourable payment terms, for example, 30-day payment terms to seven days. There is also need to start talking about reviewing SI 64 and also look at how positively it has impacted the economy while also addressing the challenges thereof.
It is also critical that the government lives up to its promise, where it indicated that permits would be issued whenever there appears to be shortages on the market on selected products. There are still supply constraints on cooking oil and it needs constant monitoring, while ensuring prices of cooking oil come down. The RBZ is applauded for doubling foreign currency allocation for fuel and cooking oil.
Retailers and wholesalers should desist from wanton price increases. CZR has also received complaints from customers of certain players, who are not displaying prices on products. This is totally uncalled for. The government should help CZR to register all unregistered businesses in the country.