Address economic fundamentals to curb price hikes

PRESIDENT Emmerson Mnangagwa has had the misfortune of having a very limited honeymoon period, as he is serving a very expectant nation.

NewsDay Comment

For many, the removal of his predecessor, Robert Mugabe, was supposed to be a magic bullet that was supposed to cure the country’s ills, improve the economy and attract investment in one fell swoop, but this has obviously not happened.

The stubborn price hikes cannot be wished away and how Mnangagwa and his government handle this will be quite instructive on their approach to crises that rock the country.

While, for example, bakeries have agreed to lower the prices of their products after a meeting with the government, this is not a sustainable approach and it will soon unravel.

Ordering businesses to lower prices will not work and instead energies should be spent on correcting the fundamentals and fixing where the wheels went off.

Last year, the government introduced Statutory Instrument 64, a protectionist tool to shield local businesses, but despite that legislation, prices have continued to rise.

There should be monitoring and evaluation mechanisms that give indicators on whether such policies are working, because as it is, the government may be ploughing ahead with a policy whose efficacy is questionable.

As we have seen in the past, the propensity for price controls and ordering businesses to reduce prices can have catastrophic consequences.

Mnangagwa should go to the root of the country’s problems rather than seek to address the symptoms of a bigger issue.

The questions that his government should be asking is why prices of basics are going up and how they can help prevent this.

It is not enough to tell a bakery to reduce the price of bread, when inputs continue to go up and expect that entity to still be in business in the not so distant future.

While a reduction in prices is always welcome, it is a short-term strategy that will not work, as businesses’ profits will continue to be eroded, leading to closure.

Thus, it is imperative now that the government begins engaging with businesses and seeking win-win solutions, rather than populist ones that will certainly backfire.

As we have said in the past, it is important that cash shortages are addressed immediately, while a solution for foreign currency shortages should also be sought.

Without addressing these, then any government intervention would be failing to scratch the surface and dig deeper into solving the country’s economic situation.

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