adminfor the introduction of duty as a protection mechanism have responded by increasing prices. Inflation, which had been contained well below 3 percent, is now at 3,3 percent and clearly on the upward spiral.
Minister Biti had done well to consult local industry when preparing his review statement. The consultative approach is always the best when dealing with complex matters such as constructing a fiscal policy statement. He also operated on the basis of trust and accepted local manufacturers’ assurances that prices would remain stable even after duty had been imposed. Justifiably he feels betrayed.
“You have let us down. I think I should not have removed duty, but you lobbied us to say minister we have sufficient capacity to handle production. And what do you do? There has been a sharp spike of inflation,” complained Minister Biti during a Securities Commission of Zimbabwe and Zimbabwe Stock Exchange breakfast meeting in Harare on Wednesday.
Well, he has learnt his lesson. He is dealing with businesspeople that still remember the super-profits of yesteryears, especially the hyper-inflation era. Some of them have no scrupples and will not even want to think about what will happen should there be another policy reversal. They live for now.
It is not only the consumer that is suffering, but also the whole fight against inflation is being compromised. The target had been for Zimbabwe to end the year at not more than 4,5 percent inflation but the rate at which prices are going up means we could end up in worse situation. Measures have to be taken now to arrest this slide.
It was inevitable that prices would go up when duty was restored. But what is disappointing Minister Biti and the consumers is the margin of the increases, which are not supported by any underlying fundamentals other than greed.
We, however, caution Minister Biti not to be too harsh on the leaders of industry who we believe were sincere in their presentations. They could also have been let down by their members. Mr Biti was right in seeking to protect local producers. After all, had the reintroduction of duty worked as expected our economy would have emerged stronger. More jobs would have been created and more wealth generated.
What is needed urgently now is an all stakeholders meeting to review how things have gone since the re-introduction of duty. Buy Zimbabwe and the National Economic Consultative Forum have already suggested that a no-holds barred meeting be held. In any case Minister Biti still holds the better end of the stick as he will soon be working on 2012 budget. The same people who let him down will still need to meet him and justify the price increases or lose the protection they asked for. It has to be made clear that Zimbabweans prefer to buy locally produced products, which quite often are of superior quality. But they want to pay a fair price for them.
What the stakeholders meeting needs to look at is what is causing local products to be more expensive. Is it simply the desire to profit or local manufacturers have genuine challenges in keeping their costs of production low? Is it the manufacturers who are to blame for the price increases or it’s the retailers who are taking most of the profits? It would be easier to address the problem if it is at the manufacturers’ level and more difficult if it is the retailers.
As a country we need to strengthen our ability to do proper research on the performance of our companies and the factors that affect the movement of prices, especially those of basic commodities. This is one of the reasons why the Prices and Incomes Commission had been set up but it appears it has been relegated to the sidelines in the mistaken belief that market forces alone will bring discipline on the market.
The NIPC’s capacity to do research and offer the relevant advice has been affected by poor funding. Its status must be restored, not to control prices but to monitor the movement of these prices and offer the necessary advice.
The National Economic Consultative Forum is another platform whose significance needs to be acknowledged so that it can be strengthened and become more active in thrashing out some of the challenges in our economy.
If all the players in the economy are consistently brought together to talk about the challenges they are facing some of the policy shortcomings can be avoided. These stakeholders need to be accountable and set the pace of the growth of our economy. Government should simply be putting in place the right environment for business to thrive and not seek to over-regulate them. But it is the lack of discipline by the business sector that will invite Government regulation, which they may not enjoy.
Online Reporter