By Alois Vinga
THE Confederation of Zimbabwe Industries (CZI), has been tasked by its affiliate members to convene a meeting with government, to discuss the current commodity pricing furor.
President Emmerson Mnangagwa’s government has reacted angrily to price hikes by manufacturers that have placed most consumer goods beyond the reach of many. Government officials argue business has resorted to using changes in exchange rates determine prices.
“There is need to engage the Ministry of Industry and Commerce, to understand the mechanism they use when they monitor prices, and to ascertain if it is scientifically based,” the industrialists said in a statement.
The recommendation was passed after a high level meeting which saw CZI’s affiliates gathering to deliberate on the factors behind price hikes.
Mnangagwa has warned he could be forced to resort to price controls while Vice President Constantino Chiwenga has gone further to accuse some businesses of ‘economic terrorism”.
The argument from CZI affiliates is that the transition from a regulated market to an open mark, wherein government allowed the exchange rate to move from the 1:1 to one in which fundamentals regulate it have prompted the increases. The exchange rate has since moved from the initial 1:2.5 for the local RTGS$ to 3.9 against the US dollar.
“The moment the rate shot up, the producer was forced to effect the difference into the price of the commodity so as to maintain his profit and this floating exchange rate has resulted in the government undertaking duty revaluations to factor in the interbank rate on duty calculations leading to price,” CZI heard.
The unavailability of foreign currency on the formal market, through the interbank system, the industrialists argue has compounded the problems with manufacturers claiming they have had to access hard currencies on the informal market at a premium.
CZI members suggested the need for the interbank market to be allowed to operate freely, on a willing-buyer, willing-seller principle.
It was also suggested that the operations of the interbank market needed to improve in terms of transparency including publicising trade volumes by the Reserve Bank of Zimbabwe as well as the going rate.
Government, the industrialists also argued has not been clear about the exchange rate at which companies should pay the debts, at an exchange rate of 1:1 or at the prevailing interbank rate,
“As a result, some companies are factoring in the debt component on their margins in order for them to extinguish these debts which were acquired at 1:1 exchange rate,” the statement read.
Stakeholders agreed that banks have been reluctant in issuing letters of credit, because they have not received guarantees from government that the money will be available for repayment. This has reportedly prompted external suppliers of raw materials to threaten to terminate supplies to locals if they continue to fail to service their debts.
It was observed that the fuel rebate system which was meant to cushion firms from not increasing the prices after the fuel price increases in January, 2019, have not been effected and this cost has also been compounded into the prices of goods and services.