Monday, January 24, 2011

From John Robertson

We have now had two full years since the Consumer Price Index was rebased on the US dollar prices recorded in December 2008 and the averages for that month were set at 100. Such were the distortions at the time that, of the twelve groups of goods and services identified, the averages for only four of them are now recording figures of more than 100. These are liquor and cigarettes at 102,26, the rent, rates, power and water category at 116,12, transport at 105,76 and education at 110,00.

As the services can be described as almost entirely of Zimbabwe origin, their costs seem less likely to be held down by their suppliers having to compete with imports, so from medical services to hairdressers and from motor mechanics to the rates charged by local authorities, the indices have all trended well above the figures for most imported goods, as well as for locally produced goods that face competition from imports.

Some of the lowest price indices are for clothing and footwear, household textiles and the types of goods that competing supermarkets are obliged to offer at attractive prices, whether imported or sourced from local manufacturers. Other prices have remained almost unchanged and among these, fuels and lubricants are a good example. Although the index for these has reached 153,9, this figure has varied very little for the past 17 months. Fuel price increases that occurred in December appear to have happened too late to be included in the December index.

The month-on-month increases show that 28 of the 67 items surveyed for the index went down in price in December, but the tightness of the market conditions is illustrated by the fact that the prices of 30 of the 67 items were lower than in December 2009. While the managements of some factories are known to have invested in plant and equipment to achieve improved production volumes and standards, the most obvious investments have been in retail premises that might have extended the areas and stocks of goods well beyond the spending power of Zimbabweans, specially as about 70% of the working-age population is sill unable to find steady employment.

In my comments after the Budget presentation in November, I pointed out that funds for the claimed doubling of public sector salaries had not been provided for in the figures. The January salaries paid to the military and civil servants reflect my concern, and we now hear of plans for strikes and other protests. As about one third of Zimbabwe’s working population draws a government salary, this disappointment is affecting the business sector too.

Reports are also being circulated about food shortages and the growing need for assistance in the rural areas ahead of the maize harvests. Hopefully the news will start improving when the crops start coming in.

Kindest regards,


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