Source: ‘Price hikes reflect anti-export policy’ – NewsDay Zimbabwe May 1, 2019
BY MTHANDAZO NYONI
THE Confederation of Zimbabwe Industries (CZI) says price hikes currently obtaining in the country are a reflection of government’s anti-export policies and not the fault of industry.
CZI president Sifelani Jabangwe told a recent business meeting in Bulawayo that prices were moving in tandem with the prevailing exchange rates.
“Exchange rates move when there is increased demand for forex. Industry only responds to the conditions on the ground and industry is right at the back of the cost-value chain,” Jabangwe said.
“When there are policies that discourage the generation of exports then the rate runs and so do prices, thus industry is not to blame. Prices are a mere reflection of policies and conditions, blaming industry for price issues is similar to blaming the dam wall for siltation.
“True, the siltation is made more visible on the wall, but the siltation will have been caused by other activities up stream,” he said.
Prices of basic commodities have been rising since last October when the Reserve Bank of Zimbabwe instructed banks to ring-fence foreign currency from Real Time Gross Settlement (RTGS) balances.
The situation worsened after authorities did away with the fixed 1:1 exchange rate between the local currency and the United States dollar and government has been quick to accuse business of profiteering and sabotage.
Jabangwe noted that the continued pressure on pricing was dampening aggregate demand in the economy.
“Currently, there is a mismatch between incomes growth and prices and many of the companies, including government, do not have capacity to accommodate increase in wages and salaries,” he said.
“This has a negative effect on aggregate demand. Inflationary pressures emanating from the recent review of producer prices of cereals such as maize/small grains, wheat and soyabean, among others.”
Jabangwe said pricing of foreign currency has always been at the centre of the economic stability challenges of the country.
“The pricing has always been affected by supply and demand. The economy has a high propensity to consume imported goods. In 2018 the economy imported $19 million worth of water,” he said.
He said savings could have been achieved in fertilizer and other sub-sectors, but the country’s inability to deal with imports which could be substituted with local goods was worsening economic instability.
“We have to take some hard actions on these unnecessary imports, otherwise we will then have conflicts on pricing of goods after we have drained the economy of forex while importing trinkets,” he said.
“We believe the trade deficit is at the heart of our challenges, particularly relating to price instability. It is not the root cause because there are causative factors which need to be unpacked. Since 2009 we have been running trade deficits annually,” the CZI boss said.
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