daniel chigunwe
Gibson Nyikadzino
Correspondent
Did you know that a large number of firms in all advanced economies specialise in warfare as a business? These firms are reliant on perpetuating war to continue being in business. This explains why despite the human cost of life war continues between Ukraine and Russia, between Palestine and Israel, in Myanmar, and in other areas.
Particularly for the USA, that is why its successive governments are involved in some form of military adventure without any bearing on the life of an average American citizen. It is so because the military-industrial complex has vested interests in keeping the world at war to get profits, profiteer and maintain that immoral cycle.
The desire to attain profits and profiteering in this macrocosm can also best be explained in the microcosm context of the business operations in Zimbabwe’s economy, the exorbitant profit margins, profiteering and how the corporatists and syndicalists are enjoying relieving their business pain onto the ordinary people. It is not a surprise that there are businesses that are enjoying the current state of affairs where they make a “killing” through the pricing malaise.
There is however, no single way to look at this aspect, there are multiple avenues to try and find the solutions to the ongoing economic misconfiguration on the pricing side. Every stakeholder, government included, has a role to play in ensuring there is a moral standard by those in business to operate and get standard business profits for their commodities.
Business stoking animosity?
There is a famous supermarket in Harare selling a small bottle of peanut butter for $5,700. Using the prevailing interbank exchange rate, that translates to about US$5,30. With use of an elastic mind, if one uses the speculative rate of the black market, it leaves the same commodity at a cost of almost US$3. The same commodity however, costs US$1 when buying from empowered small business start-ups.
From that dollar, there are elements that include profit, the cost of production and other sundry expenses. In essence, the supermarket is superficially making a “profit” of between 300 to 570 percent.
The above business case can be seen as inadequate and deficient to give a general view on what profiteering looks like, but it is without doubt that Zimbabwean businesses, retail and wholesale, are likely stoking animosity between government and the people.
The profit margins in some Zimbabwean businesses are therefore beyond the acceptable global standards of business. It is worth to note that profit margins vary by industry. According to the Corporate Finance Institute, twenty percent is considered a good profit, while ten percent is considered average or standard, and five percent profit is considered low or poor.
To think in good economic terms, without profiteering, good profit margins therefore allow companies to cover their costs and generate a return on their investment.
This possibly is not what businesses in Zimbabwe are doing.
In this market, prices are communicating some information and sending signals of what businesses and stakeholders need to do, and what decisions consumers ought to do. There is need for correct commodity pricing of goods and services in the market. What is obtaining is fuelling business malpractices and causing instability, chaos and panic in the national ecosystem. In correcting these anomalies, no one should be considered an enemy, for no one is!
Liberalism vs Liberality
There is need for a recast on the government’s role in the business to protect the consumer, who naturally suffers from the boardroom decisions made by greedy corporatists. For the business sector, the government has been liberal to allow them to thrive without issues relating to price controls, commodity rationing and in other cases, government has been able to avail foreign currency for businesses to keep and maintain their operations viable.
Liberalism is credited for allowing individuals to live in liberty and enjoy the benefits, but also suffer the consequences of their actions. Whereas, liberality involves the government’s ability to allow individuals to indulge in all their desires while protecting them from the consequences. Free-market economists or libertarians contend that government intervention should be limited to all but the most basic services, such as the protection of private property and the maintenance of law and order.
Such an idea is however detached from reality, in some great measure. History is full of such examples from the 1930s during the Great Depression in the USA to the current successes of China. For businesses and private enterprises to succeed, it is because of an enabling environment set out by government to protect the people from the consequences.
As such, the pricing consequences that are affecting the people, the economy and the ability of new start-ups to be competitive with the syndicalists need some form of government intervention. This is now necessary because of the market inefficiencies and failures that are induced by profiteers.
To ensure that people pursue social and economic goals and improved welfare, the government should not be a by-stander who cannot introduce rules and regulations to deliver unachievable results under a free market. There are multiple tools at government’s disposal as it is key for it to intervene. It is good to be Keynesian.
Government should play an active role in this issue instead of letting the free market reign.
Behavioural change
There are many factors, some economic and political, that can be used to explain the pricing challenges in Zimbabwe. The one that has can be outstanding to understand this is behavioural. The business environment of the 2008 economic challenges is still lingering in the minds of many businesses as they have failed to adjust to the idea of having made profits in “billions”. Apart from the behaviour of business enterprises, the behaviour of consumers is also key to decide the price of a product. Where consumers like spending, businesses can increase prices by small margins in a fashion that might be unnoticeable, but hurting the consumer. From this aspect, behavioural economics becomes the scientific basis for behavioural pricing. Pricing and buying become psychological. There is need for a new mind set by all stakeholders in approaching the issue of pricing and profits, to address and avoid profiteering and burden the consumer.
It is difficult and impossible for our businesses to think like the military-industrial-complex where people want the economic situation to remain bad for them to maximise benefits without any of those cascading to the ordinary citizen.
Profiteering is a conflict in itself, and all conflicts are destructive. Intelligent and future-oriented businesses should therefore appreciate that there are no winners in conflict, as perceived winners may suffer more losses than if they had abstained from taking part in the conflict at first.
Zimbabweans, remember we are one. This is homeland!
Online Reporter