Zimbabwe, which has removed import duties on basic commodities, is roping in its Competition and Tariffs Commission to descend on businesses accused of “unfair” price hikes after President Emmerson Mnangagwa’s administration noted collusion practices that are reportedly leading to “artificial shortages” of foodstuff in retail outlets.
Mnangagwa’s cabinet last week announced the scrapping of import duties on basic commodities as a means of fighting price increases that are fuelling inflation. Zimbabwe is also floating physical and digital gold coins in its efforts to strengthen the local unit of exchange.
The government has now said that artificial shortages are emerging in formal retail outlets, while industry leaders have continued to call for “a single reference exchange rate for pricing goods and incomes” considered “key” for stability.
After a cabinet meeting on Tuesday, Mnangagwa’s administration said it had concluded a survey of pricing of goods and commodities that had noted “artificial shortages of some locally produced goods especially in formal” retail shops.
“From the investigation, prices in formal retail sector are relatively high in both US (dollars) and ZWL (Zimbabwean dollar) terms when compared to the informal retail sector and are thus indicative of speculative and forward pricing,” said a post cabinet meeting report.
It also said Zimbabwean consumers were being forced to “buy goods that they don’t need in formal retail outlets when they pay using USD (US dollars) so that they may offset the change balance” as the retail outlets were refusing to mix US dollar and Zimbabwe dollar transactions.
As a consequence of this, the government has decided to increase enforcement measures against the collusion on pricing through the Competition and Tariff Commission. The commission has been mandated to “address the unfair business practices, which have become rampant” in the Zimbabwean economy.
Zimbabwean businesses said the operating environment “remains challenging with many distortions” around the monetary sector.
Mnangagwa’s administration has introduced measures such as allowing companies to retain 100% of their foreign currency revenue from domestic sales. The retention of 100% of domestic foreign currency earnings by local companies was set to “reduce pressure for the greenback on the parallel market for corporates,” according to economists.
Analysts at IH Securities said yesterday that while the lifting of import duties for basic commodities “bodes well for the consumer, products from the local manufacturing sector have historically been priced higher due to structural issues thereby making them uncompetitive compared to regional” products.
“The rolling back of protections for the industry will likely see reduced volumes for local firms in the relevant business lines.”
In addition to the local currency loss of purchasing power, Zimbabwe’s economy continues to be impacted by power supply challenges, which have increased the cost of doing business for corporates.
While there had been an improvement in the past few days in terms of power supply, the state power utility of Zimbabwe has now introduced foreign currency tariffs on commercial properties for improved power supply.
“The industrial sector remains affected by power supply challenges which have impinged on the sector’s ability to improve its capacity utilisation,” said Egnes Madhaka, the company secretary for Zimbabwe Stock Exchange-listed Mashonaland Holdings.