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While prices are continuing to fall following the major gain in value of the Zimbabwe dollar from the end of June and stable exchange rates being seen for almost three weeks, the Consumer Council of Zimbabwe has noted some anomalies.
The council, a voluntary organisation that for decades has monitored prices with its monthly basket of essentials and offers advice to consumers on a wide range of issues, confirmed that while food prices were falling generally between the end of June and the end of last month, the costs of some other goods and services were still rising in local currency terms.
The net result in local currency was a tiny rise over July. The US dollar figures were startling, a dramatic rise in the cost of the essentials basket of around 25 percent from the US$434,36 at the end of June to the US$540,76 at the end of last month, a week ago.
That rise in US dollar prices for certain goods and services explains the neat stability in the cost of living expressed in local currency.
ZimStat, which measures the cost-of-living in far greater detail from mid-month to mid-month had already reported the huge drop in food prices, and the stickiness in the prices of most other goods and services.
ZimStat blends the inflation rates in local currency and US dollars to produce a single monthly inflation rate, so their figures miss that jump in US dollar terms noted by the consumer council.
What appears to be happening is that some are pushing up US dollar prices to maintain the local currency price, or at least modify over how much it can fall. This is called profiteering.
The rationale for quoting in US dollar prices was that the Zimbabwe exchange rate was very volatile and US dollar quotes or pricing allowed stable prices. So why, on average, did they rise by a quarter during last month?
Even in food prices this had been noticed for some products in those shops where the main quoting is done in US dollars although the shop accepts Zimbabwe dollars at the official exchange rate plus the 10 percent premium retailers are allowed to charge.
While large swathes of products had stable US dollar prices, there were groups of products rising in price in US dollar quotes. These were not seasonal products that might cost slightly more in the middle of winter, but products with longish shelf lives.
In the food business these problems are more irritations in the general falling of prices. In the last week we have even seen big falls in the prices of products from a couple of established agro-industrial manufacturers or imported products.
Comparing the local currency prices quotes in most shops with the US dollar “tuckshop prices” it seemed that these had been priced at an exchange rate of around $10 000 to one US dollar, illegal but possible with dual pricing from a manufacturer.
The consequences were straight out of a simple economics book. The competition, using the correct exchange rates, saw its sales soar. The expensive products remained on the shelves and would have gathered dust but for the efforts of junior staff assigned to dusting duties.
The next step was equally obvious, slash the prices and this might well have needed negotiations between the supplier and retailer and credit notes or something similar.
This return to normality and rationality, at least in the food businesses, must now be short circuiting what some consumers were resorting to, converting local currency to US dollars on the black market, where rates while falling at still sticky as the little dealers still have expensive stock of foreign currency, and then buying in a tuckshop.
In a growing number of cases the supermarket price in local currency is around the tuckshop price in US dollars when you use the retail rate, that is the interbank rate plus 10 percent. That rate has been hovering around $5 000:US$1 for a while now allowing consumers to make almost instant calculations.
In other sectors of the economy suppliers and retailers have been claiming that stocks bought during the period when the US dollar was at its most expensive are still around but this has less and less credibility.
It had little in any case, since when prices were rising rapidly there must have been a lot of old stock bought at a much lower price. Suppliers said they had to charge the replacement cost.
However, you think about it now the replacement cost is lower and old expensive stocks are being sold off.
One problem could be more cartels, usually unofficial, in many other sectors or even what amounts to monopoly suppliers, or at least a major dominant supplier.
We urge the consumer council to look into this while it keeps up the good work of checking prices.
The council could also be advising consumers to use their considerable muscle in selecting which brands and which shops get their money.
When prices for identical or near identical products can vary so much between suppliers and manufacturers they need to reward the one who seems to care more.
This is almost certainly why some very high priced brands, prices calculated using forward pricing when rates were rising or shoving up the US dollar price if they wanted to remain legal, have had to surrender to simply get their products moving off the shelves.
No one has to try and organise boycotts and the like, but continually reminding consumers that they are the ones with the money and can spend it how they like.
And they can, by comparing brands and doing at least some shopping around still win some major bargains, even as the more difficult manufacturers and suppliers give in to the consumer pressure.
We expects prices to be falling this month as more join the process of aligning prices with the stable exchange rates we are now seeing. And they are stable.
Yesterday’s wholesale auction for the banks broke three records: It was easily the largest sale of foreign currency to date, just over US$17,5 million. But even that huge sale saw the exchange rate move by the smallest percentage to date, an extremely tiny 0,079 percent, so the size of the sale did not affect the stability.
And the difference between the top bid by a bank and lowest bid by a bank was the smallest gap seen in the auctions, $34,45 or 0,76 percent, showing the banks have now accepted the new found stability and working with it.
leeroy
Online Reporter