Poor wages cited for reduced demand in goods and services

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By Alois Vinga

BUSINESS experts have attributed the current decline in the demand for products and services to poor wages and other earnings by the majority.

Commenting on the situation, Confederation of Zimbabwe Industries president, Henry Ruzvidzo admitted that the impact of the nation’s wage structures is severely affecting local demand goods and services.

“While we have not carried out a survey to determine the extent of effect which salaries have had on local demand, industrialists agree that to a visible extent, demand has been affected because wages have not risen to the same levels as most prices have gone up due to inflation and interbank market dynamics,” he said.

Ruzvodzo also said that some companies were moving to reduce productivity while some are beginning to target foreign markets.

Fast, Moving Consumer Goods expert and Zimbabwe National Chamber of Commerce Mashonaland Region vice president, Archie Dongo described the mismatches as “worrying”.

“A worrying trend we are observing is that people can nolonger afford to buy the goods and as a result, demand has fallen.

“At the same time, manufacturers are not producing above capacity which indicates that if the country’s citizens still had their purchasing power, shops could have run out of the goods,” he said.

He added that the challenge has been worsened by the current electricity outages which have seen the costs of doing business increasing.

“So currently, we are running on diesel powered generators which cost approximately US$0.30 per kilowatt hour which means that the cost of doing business is increasing at a time when demand is very low,” he added.

Some companies have been forced to shelve specific projects due to the decline in demand.

Fidelity Life Assurance chairman, Fungai Ruwende recently announced that the firm will be leaving the residential property market.

“We have been forced out of the residential property market investments by the general economic conditions obtaining in the economy because prices have gone up but salaries being earned by people in our target markets remain stagnant. So if we develop the properties, we are not going to get buyers,” he said.

The remarks come against a background of most companies in different economic sectors have not managed to adjust salaries to match the inflation rate which currently stands at 175%.

Recently, the Reserve Bank of Zimbabwe reported that imports increased by US$88 million while exports dropped by 6 % partly owing to electricity outages which have seen load shedding schedules being maintained for 18 hours periods.

However, Employers Confederation of Zimbabwe president, Israel Murefu recently turned down the request arguing that most companies in the country are operating in a depressed environment and warned that such demands may further force businesses to close shop.