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RESERVE Bank of Zimbabwe Governor John Mangudya presented his Monetary Policy Statement on Wednesday and hopes are high that his confidence building and production enhancing interventions will help accelerate economic growth and put the country on a sound footing. The RBZ chief announced a cocktail of measures to inject more impetus into the economy which has been hamstrung by deflation, low capacity utilisation in the manufacturing sector and generally high economic cost drivers that are driving away investors while stifling local industries’ capacity to compete against cheap imports.
While imploring industry to consider a downward review of their prices in line with new policy measures adopted by government, Mangudya bemoaned high municipality tariffs, environmental management fees and some non-tariff barriers citing them as some of the major bottlenecks choking the competitiveness of the economy. Until these cost drivers are tackled, the ease of doing business in Zimbabwe will remain high and it is trite that the National Competitiveness Commission – mandated to critically interrogate the national pricing structure – redouble its efforts to ensure compliance with government policy.
Industry has been engaging government on this matter and we feel it is time high utility charges particularly electricity, water and licensing requirements are reviewed downwards to assist in economic development.
We agree with Mangudya that most farmers, for example, are saddled with electricity bills because the tariffs are not competitive especially on agricultural produce whose prices are not only low, but sometimes even difficult to sell as merchants substitute local goods with imports.
Mining and other sectors are facing the same fate from the utility tariffs while landlords also need to adjust their rentals, especially in the high density areas. Fuel merchants and mobile phone operators have adjusted their tariffs downwards but until all major cost drivers, especially utility charges are reduced, it will be difficult for industry to lower prices.
In his statement, Mangudya said in order to provide solutions to the economic challenges; a two pronged approach would have to be implemented – enhancing confidence and production capacity and liberalisation and monitoring of foreign payments.
He said addressing the welfare of workers and consumers in general from a cost reduction point of view would also assist businesses in that their products would become competitive against imports.
The RBZ boss said after fuel suppliers reduced prices by around 10 percent recently, consumers were expecting the same to happen to almost all the prices.
“The same is true for basic commodities which go into consumer basket, such as bread, tea, cooking oil,” said Mangudya.
“Businesses will need to review prices of such commodities. It is failure or bad faith by business to quickly review prices downwards that influences workers to demand higher wages and salaries that are commensurate with the high cost of living.” We call on industry to heed Mangudya’s plea and immediately review prices. In the same vein, we implore government to ensure that utility tariffs are lowered in tandem with regional trends. Smuggling of basic commodities should also be stopped as they provide unfair competition to locally produced goods. Mangudya also revealed that the RBZ had received $100 million recapitalisation from Treasury and we applaud this gesture as it will go a long way in restoring the central bank’s lender of last resort function.
He also announced the demonetisation of the Zimbabwe dollar and compensation of account holders who lost their savings when the country adopted the multi-currency system in 2009. Under this exercise, expected to complete by June 30, 2015, all genuine accounts would be paid an equal amount of $5 per account. While this may appear like a miniscule amount, the significance of this policy measure is to bring finality to this long outstanding government obligation to the banking public and to formally pronounce the demise of the local currency.
Mangudya also proposed a wage and salary freeze for this year, saying this could be traded for price reduction and we feel this is reasonable as the economy cannot afford a salary hike. This means that Zimbabweans should concentrate on ensuring that production is increased and economic cost drivers are arrested so that prices of basic commodities go down.
This is attainable.
Online Reporter