Thursday, February 4, 2010

Latest Food Price Hikes Absurd

4 February 2010

Harare — The cost of food for a family rose an incredible 10 percent last month, the Consumer Council of Zimbabwe found when it did its rounds last week checking prices of the common items that make up the monthly "basket" for a family of six.
Most families had already noticed this post-Christmas surge in food prices but confirmation of the trend allows something to be done about it.

But first we must find out why there was this sudden surge. The Consumer Council blames speculation by retailers and shop-owners on an expected significant increase in civil service pay, an increase that did not happen.
While grateful for the council's research, we feel that they are blaming the wrong people.
The retail trade in Zimbabwe is exceptionally competitive. Four large supermarket chains, backed by several smaller chains, independent supermarkets and small grocery stores mean that the average Harare shopper can usually visit several shops within a short walk of home, place of work or on the route between the two.
We cannot imagine that every single one of the several hundred owners and managers who independently set retail food prices in Harare would simultaneously come to the conclusion that it made sense to jack-up retail prices on a dubious bet. In fact, this business is remarkably price sensitive, as some found last year.
The Consumer Council itself found that in other sectors, where competition is almost always less intense, prices were far more stable yet these should have shown even larger jumps if retail speculation was the reason for food rises.
When we look at the actual products that went up in price we find one appalling fact. Almost all the products that rose in price were made in Zimbabwe.
When Zimbabwe switched to hard currencies at the beginning of last year, most items on supermarket shelves were imported. Within weeks Zimbabwean firms were back in production, and soon were able to undercut foreign suppliers on price or produce better quality for a similar price or do both
The local manufacturers were helped by the mid-year appreciation of the rand against the US dollar. This made South African goods a little more expensive and so opened more opportunities for well-priced Zimbabwean goods.
But, and this is the old problem resurfacing, Zimbabwean food processing is concentrated in the hands of a small number of companies. Some so dominate the market that they are either monopolies, or so close it does not matter, or half a duopoly. But duopolies do not make competition.
Two men playing a game of golf can come to an arrangement that sends factory gate prices soaring while a meeting to raise retail prices without reason would have to be held in the Harare International Conference Centre.

Some previous price rises, such as for maize meal, made sense. The cost of the basic maize rose, because it was imported and the rand had appreciated, or because Zimbabwean farmers obtained parity pricing.
But some of the more recent price rises do not make sense. The rand has been pretty stable against the US dollar for several months so imported raw materials or packaging should have remained constant.
And we see that with packaged food imported from South Africa. That has remained very constant in price with just tiny rises caused by South Africa's inflation, and that is falling.
So there does not seem to be any reason for rises in the price of Zimbabwean products between December and January.
But even if there was a reason we would not know it. These same monopolies and duopolies are still as secretive and arrogant as ever. They dictate without even explaining.
But these times are at least different. The prices cannot spiral. Already we are seeing more packaged food made in South Africa, Zambia, Mauritius and Botswana creeping back onto our shelves. There is imported bacon cheaper than our own major brand; imported cola no more expensive than that canned in Harare; more imported canned foods. The list is long.
Zimbabwean manufacturers need to relearn their lesson. They can, if they try, undercut imports since transport costs are high. With parity pricing they can compete on quality. What they cannot do, if they hope to stay in business, is raise their margins more than their foreign competitors. The consumers will punish them.
We hope the Consumer Council of Zimbabwe will now turn to these errant manufacturers and demand explanations that can be published.

1 comment:

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