Prices don’t make sense any more


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The Lobengula Street Mall is back to life. Vendors who were driven away during Operation Murambatsvina, five months ago, are back in full swing. And they appear to be trying to make up for lost revenue.

Bananas are going for up to $10 000 each, tomatoes $30 000 a packet and roast mealies $40 000 a cob. The prices are just ridiculous. But the vendors are not alone. In the shops, bread now sells for $50 000. Bathing soap is selling for $70 000, washing soap for $170 000 a bar, khaki trousers for $1.5 million, and a pair of local manufactured shoes goes for $2.5 million.

The figures just don’t make sense any more. The Consumer Council of Zimbabwe (CCZ) says an average Zimbabwe family -mother, father, and four children – now needs $12.9 million a month for its basic commodities.

It needs $6.4 million for food and $6.5 million for transport, soap, rent, electricity, health, education, clothing and footwear.

The food basket consists of just the basics, like 2 kg of margarine a month, 40 kg of mealie meal, 6kg of sugar, a pint of milk every day, a loaf of bread a day, 8kg of meat and 4 kg of rice, just to name a few.

The regional manager for Matabeleland Comfort Muchekeza said the basket reflected the actual prices obtained on the market and not the controlled prices. The prices were arrived at after a survey in the five regions of the CCZ which are Bulawayo, Masvingo, Gweru, Mutare and Harare.

The surveys are conducted twice every month, during the first and last weeks of the month.

Prices continue to shoot up. In November for example, the CCZ says, the price of washing powder increased by 62 percent compared to the previous month. White sugar was up 52 percent. Rice rose by 58 percent, meat by 29 percent, fresh milk by 32 percent and flour by 18 percent.

Official inflation shot up to 502.4 percent in November up from 411 percent in October.

To make matters worse, the dollar, which was trading at just under $6 000 to the greenback in January is now heading for $80 000 on the official market.

Wages have, however, not kept pace with the declining local currency or inflation. A Zimbabwean would need to earn at least 12 times what he or she earned in January just to keep pace with the declining currency.

The newly announced tax-free threshold of $7 million a month, for example, is only half the poverty datum line.

But what is bothering most Zimbabweans is the amounts people now have to work with. They have to work with millions. Even the national budget is now in trillions, figures that are rejected by a simple calculator.

In his third-quarter monetary policy review, central bank governor Gideon Gono said the country might have to come up with a new currency next year. This has led to debate on whether the country should just remove the last three zeroes or not.

Some vendors are now ignoring them. Some shops write them in such a way that they are in a sense telling their customers to ignore them. But even after removing the three zeroes, the prices would still not make sense. Bread going for $50 000 would still remain at $50 which is ridiculous.

Removing four zeroes would make more sense with bread coming down to $5, a khaki trousers to $150 and shoes to $250. Equally wages and salaries would have to climb down from millions to hundreds and thousands.

Economist and labour expert Godfrey Kanyenze said while it sounded nice, removing the zeroes without addressing the economic fundamentals would not help at all. The currency would just plunge back to where it is.

He said politics of appeasement was draining the nation. The introduction of the senate, for example, was going to push up government expenditure as this meant new cars and perks as well as salaries for the new senators, and probably a Mercedes Benz and a house for the president of the senate.

The sacking of the chief executive of Air Zimbabwe, just over a week ago hardly a year after his appointment, also meant that the government would have to pay him his salary, and if it engaged another person it would be paying double the salary for one job.

The same applied to government meddling in local authorities. This would also inflate the wage bill.

“As things stand, things are likely to get worse. Inflation, the country’s enemy number one was supposed to start declining in October but it is still going up. It could even reach 700 percent before it starts going down.

“We are now living an artificial life and we are always shooting ourselves in the foot. Things are not likely to change unless we normalise our politics and our international relations. But the President is not adopting a conciliatory tone. It’s fire, fire, fire all the time,” Kanyenze said.

He said the only hope was a good agricultural season because a good harvest would ease the pressure on prices to go up. Though the country was receiving some good rains at the moment, Kanyenze said a bumper harvest was unlikely because of the shortage of inputs.

The government had also not announced producer prices which would have acted as an incentive for farmers to produce.

(30 VIEWS)

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Charles Rukuni
The Insider is a political and business bulletin about Zimbabwe, edited by Charles Rukuni. Founded in 1990, it was a printed 12-page subscription only newsletter until 2003 when Zimbabwe's hyper-inflation made it impossible to continue printing.

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