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WE welcome the decision by bakers to reduce the price of bread from 90 cents to 85 cents with effect from today and hope other producers will follow suit in line with Reserve Bank of Zimbabwe submissions for the country to re-adjust prices to enhance domestic economic competitiveness and curb pressure for increased wages.
Commodity prices and service charges in Zimbabwe are among the highest in the Sadc region and need reviewing. The skewed nature of the country’s pricing model has stunted economic growth and began with the introduction of the multi-currency regime in 2009.
As a dollarised economy, Zimbabwe does not have the option of devaluing its currency to regain competitiveness and as such a combination of increased productivity and a reduction in the cost of doing business needs to be achieved to gain competitiveness.
The stronger United States dollar and the absence of change have seen Zimbabwean products being priced higher than imports from neighbouring South Africa. But the introduction of bond coins is expected to curb the abuse of the US dollar and restore normalcy in pricing by providing change.
The move by bakers, coming after similar cuts in the prices of beer, soft drinks and mobile phone tariffs, will certainly boost sales and liquidity in the market since bread is a mass product with a corresponding high demand. In most countries, the prices of bread, milk and newspapers are almost in the same bracket and we are glad that Zimbabwe Newspapers has already taken the lead in this vein by reducing the price of its vernacular paper, Kwayedza to 50 cents.
We also report elsewhere on these pages that bankers have reduced service charges in a move expected to reinvigorate the economy and we applaud this development. But it is the reduction of the price of bread that will have far reaching implications for Zimbabwe’s economy.
With the final bond coin, the 50 cent denomination, expected to be unveiled at the end of this month, the circulation of the coins will be enhanced. We applaud the Grain Millers of Zimbabwe, Bakers’ Association of Zimbabwe and retailers who met last week and resolved that the rounding up of retail prices of bread to $1 was no longer fair and necessary in light of the introduction of bond coins. They have demonstrated foresight and business acumen.
The three parties agreed that in light of the reduction of prices by bakers, retailers may apply mark ups of up to 10 percent on bread prices meaning that the price of bread in supermarkets will range from 93 cents to 98 cents depending on the brand.
Announcing the latest developments, Bakers Association of Zimbabwe president Givemore Mesoemvura said: “In order to obtain full appreciation and adopt the usage of the recently launched RBZ bond coins in the retail and distribution of bread we met as parties involved in the bread value chain and came up with the resolution that bread price on the bakers’ side should go down to about 85 cents and that price should then reflect on the shelves of retailers by way of different retail prices. We also agreed that millers shall re-look at revising downwards the prices of wheat bread flour to bakers who in turn shall pass the price drop to the retailers for the benefit of consumers”.
Grain Millers’ Association of Zimbabwe president Tafadzwa Musarara said the reduction of flour prices to the bakers should reflect in the whole value chain so that it benefits consumers who have been on the receiving end since dollarisation. He said the reason why bread was selling for a $1 was due to issues of change so the introduction of bond coins would add convenience to the market.
“Change is very critical and we hope that we’re going to save an average of four cents per loaf. With one million loaves sold every day this will account for $40,000 and by the end of the year the country and the sector would have saved about $10 million.
“If the bond coins were rolled out in 2009 this economy could have saved about $50 million in change,” said Musarara. We agree and urge other industries to follow the lead set by bakers and reduce their prices. We are aware of their call for the government to address cost drivers and ease of doing business so that their products can be competitive and are sure this is being looked into by the Cabinet Inter-Ministerial Committee chaired by Industry and Commerce Minister Mike Bimha.
The Committee has identified labour, power, water, finance, transport and trade logistics; tariffs and trade taxes; taxation and information technology as the key cost drivers and has already made recommendations on how these can be overcome. The ball is in industry’s court and it simply needs to play ball.
Online Reporter