The rationale behind Mnangagwa's pro-poor interventions

Published: 28 April 2019

Since October last year prices of most basic commodities and services have been on an upward trajectory making life difficult for the majority of people.

Manufacturers, retailers and other supply chain players have pinned blame on the high costs of fuel and foreign currency, whose demand the central bank cannot meet owing to low export receipt inflows due to low production. This has subjected the lives of ordinary people to the whims of avaricious economic players.

The scenario has left many people looking up to Government to jump in and provide some form of relief to their plight. This set of circumstances has opened Government to unfair criticism by some people especially in the opposition camp who are callously seeking to wring non-existent political capital out of the situation in the hope of making up for their poor electoral showing during last year's elections in the face of increasingly restive youth constituency in their ranks. Some traders are taking advantage of the country's unfortunate situation to profiteer at the expense of the people and lay blame for their unjustified prices at Government's door.

In all this no supply chain is prepared to take blame for the resultant impoverishment of the ordinary person. Manufactures are blaming retailers for the prevailing price craze. They feel that retailers are unethically adding inexplicably high profit margins on products in the name of trying to ensure access to foreign currency from the informal market. The Confederation of Zimbabwe Industry (CZI) president, Sifelani Jabangwe is reported to have stated that retailers were exorbitantly profiteering to the detriment of the consumers.

Sadly, some manufacturers are also known to be profiteering citing the high US dollar exchange rate which peaked to over RTGS$5 for the greenback during the Easter and Independence holidays. Since the ongoing pricing madness started late last year, some factors of production such as electricity, municipal rates and wages remained largely stagnant. Manufacturers and retailers are deafeningly silent about these factors. Suddenly it is now as if foreign currency is all that manufacturers need to produce goods and services.

What makes it worse is that some traders are not using the prevailing interbank market. They are even speculating what the rate could be in future when they restock. This points to the manufacturers' skewed costing model and retailers' strange pricing model which disregards other factors in order to justify the punitively high pricing regime which borders on theft.

While manufacturers and traders are openly defying Government by abusing its observance of market forces to overcharge their customers by unreasonably overpricing their goods, the consumers, who are between a rock and a hard place and have no one to turn to, look up to Government to come to their rescue.

Government has not disappointed in its response to ordinary people's plight. When fuel prices went up in January this year commuter minibus operators increased their fares from an average of RTGS$1 for a local trip to RTGS$3 citing the fuel increase. This made life very difficult for ordinary people. Government chipped in reviving the Zimbabwe United Passenger Company (Zupco)'s urban commuter services by roping in other bus operators who brought their buses to boost the parastatal's fleet which benefited many commuters. The initiative proved popular with people in other cities and towns appealing for the extension of the same and so far this has already been done in Bulawayo and Mutare. More urban and rural centres are set to benefit as Zupco is set to acquire 800 more buses with President Emmerson Mnangagwa unveiling 25 buses just before this year's Independence celebrations.

Some have questioned the initiative as they felt that it was reversing the gains of the indigenisation policy which had seen many people participating in the economy as commuter transport operators without having to go through the process of opening formal companies. The new administration believes in the power of the market regulating itself. This explains why it did not descend heavily on the kombi operators ordering fare reductions as the previous administration would have done under the same circumstances.

Instead, it introduced the Zupco initiative, which rescued commuters from the greedy operators, by providing competition without dictating how the operators should go about their business. Put differently, Government is pushing for free enterprise and only chipping in to rescue the vulnerable from the negative effects of the transition process.

Government believes in engagement instead of dictating to business. This is why the Minister of Industry and Commerce, Nqobizitha Mangaliso Ndlovu has so far engaged bakers twice this year to negotiate mutually agreed bread prices thereby averting shortages which would certainly follow if he had just ordered a price reduction.

President Mnangagwa indicated during his Independence celebration speech that Government was mulling supporting small bakeries to ensure the availability of affordable bread locally. Some people quickly rushed to dismiss and criticise the plan as being akin to reverting to the old era's economics of Basic Commodities Supply Side Intervention (Bacossi) under the former Reserve Bank of Zimbabwe (RBZ), Dr Gideon Gono but nothing is further from the truth.

Currently Zimbabwe is being served largely by three bakeries namely Baker's Inn, Lobel's and Proton which are based mainly in Harare except for Proton which is located in Marondera. This has seen the bakeries making deliveries to cities and towns all over Zimbabwe every night or morning. In some cases these distribution trips exceed 400 kilometres one way as is the situation in bread deliveries between Marondera and Bulawayo. This obviously forces the bakeries to factor in transportation costs into their pricing making their bread unaffordable.

Most cities and towns had small local bakeries most of which have ceased operations owing to the prevailing economic challenges. The President's initiative could see these bakeries being revived to provide affordable bread and employment to local people. It is gratifying to note that the initiative already has the backing of the Confederation of Zimbabwe Retailers (CZR). The solution enables Government to allow market forces to dictate bread prices in favour of the people through competition.

Government is acutely aware that in the face of the prevailing economic hardships, civil servants like other workers in the country are finding it increasingly difficult to make ends meet. This is why between January and February this year it paid RTGS$95 per month cushioning allowance to civil servants pending the conclusion of the 2019 cost of living adjustment negotiations. This ended in April when the negotiations culminated in a 29 percent salary increment with effect from 1 April.

In addition to the foregoing, Government is pursuing other avenues to ensure that, going forward, business does not continue exploiting and abusing consumers through foreign exchange-linked and exorbitant pricing. Currently Government is seized with the Consumer Protection Bill which, when enacted into law, will provide for the establishment of the Consumer Protection Agency and regulate Consumer Advocacy Organisations among other issues which are meant for the protection of consumers from predatory traders. Unlike the Consumer Contracts Act, which the bill is set to replace the Consumer Protection Act, has mechanisms for redress. This will go a long way in deterring wanton fleecing of consumers by traders.

- sundaynews

Tags: Mnangagwa,