Zimbabwe inflation down but so is consumer spending

Tight monetary policy may have slowed inflation, but it has weakened consumer demand, according to Zimbabwe’s largest food manufacturer.

Central bank has maintained interest rates at 200% and kept a tight leash on money supply growth to tame inflation.

Inflation slowed to 268.8% in October from 280.4% in September and 285% in August.

The downside has been a collapse in consumer spending, according to National Foods, which makes household brands such as Red Seal and a range of basics.

“Consumer demand slowed in the second half of the financial year as inflation accelerated, particularly in respect of high-value products,” Natfoods says.

“Whilst the interventions, particularly in respect of monetary growth and ZW$ interest rates, have achieved their desired objective they have also brought about reductions in consumer demand post year-end. The migration out of this necessary readjustment period will require a gradual easing of these policies in order to recover consumer demand without reigniting inflation.”

Despite this worry, Natfoods says it is “optimistic on the overall medium-term trajectory of the economy”, seeing growth coming from farming and mining.

In anticipation, the company is investing US$30 million on major projects that include a new flour mill for Bulawayo, a second breakfast cereal plant for Harare, new biscuit and pasta plants plus a “substantial reinvestment” into its Harare stockfeed plant.

Says Natfoods: “The installation of the new mill at our Bulawayo site has commenced and the mill remains on track for commissioning early in 2023. The new mill will increase wheat milling capacity by around 2 000 tonnes per month.”

Showing the strain on customers’ pockets, sales volumes of products such as biscuits fell in the year to June, while sales from its budget unit – which packs rice and salt – saw growth of 31%.

Natfoods says more and more Zimbabweans are eating pasta, and the company is purchasing a new pasta line to meet demand.

“This investment will also see the localisation of pasta production, which traditionally has been imported as a finished product. It is expected that this project will commission late in 2023.”- NewZWire

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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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Maposa says:

November 3, 2022 at 2:53 am

Why retaining critical skills only and deporting the rest? We need those critical skills here in Zimbabwe to develop our nation. South Africa should train its own people. In this era there are people who still think that immigrants pose a threat to their economies instead of taking advantage of cheap labour to boost their economies. It's a shame!