Panic as basics run out

By The NewsDay | May. 16, 2022 | 5 Min read

Last week, Mnangagwa dealt a heavy blow to local industry by stopping banks from lending to everyone, including the manufacturing sector, a move believed to have triggered the current shortages.

BY JAIROS SAUNYAMA/SHARON BUWERIMWE/MIRIAM MANGWAYA

PRESIDENT Emmerson Mnangagwa and Finance minister Mthuli Ncube’s recent economic pronouncements have reportedly triggered a shortage of most locally-manufactured basic commodities in most retail shops, while others were overpriced, raising fears of a repeat of the 2008 scenario.

Last week, Mnangagwa dealt a heavy blow to local industry by stopping banks from lending to everyone, including the manufacturing sector, a move believed to have triggered the current shortages.

To plug the hole, Ncube on Saturday gave those with free funds the greenlight to import basic goods to fill in the gap.

All this has been viewed a huge betrayal of the local industry which was on a recovery path, while some sections are pointing to Ncube’s kneejerk policies as signalling a return to full dollarisation. Government has in the past restricted the importation of basic commodities as a protectionist measure to support the local industry.

Zimbabwe is currently experiencing a sharp increase in prices for basic commodities especially cooking oil and mealie-meal which are fast disappearing from shop shelves.

Wholesalers at the weekend were selling a case of (12) two-litre cooking oil bottles for US$80, an increase from US$53 two weeks ago.

Some retailers are selling a two-litre unit of the product for between US$5,50 and US$7, while others have run out mealie-meal and cooking oil resulting in consumer panic and a further spike in prices.

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A snap survey by NewsDay yesterday revealed that some retail giants were limiting the number of commodities such as cooking oil per customer to curb hoarding.

Consumer Council of Zimbabwe executive director Rosemary Mpofu said they were closely monitoring the situation.

“We are in constant engagement with the suppliers of goods to check what could be the cause for those shortages. We are conducting a survey to come up with a true picture of the situation throughout the country. It could just be an issue synonymous with some particular shops which could be different from the situation obtaining countrywide. Our Monday (today) survey outcome will then explain the issues at hand,” Mpofu said.

Economists have warned of looming serious shortages of basic commodities influenced by the economic measures announced by Mnangagwa and Ncube.

In a Saturday evening statement, Ncube said those with free funds were with immediate effect allowed to import basic commodities. But the imports will not immediately fill the huge gap the local manufacturers had been supplying.

“To further ensure that citizens have access to affordable basic commodities, in the face of recent substantial price increases in the shops, the government hereby opens up imports of basic commodities by citizens, through lowering of import tariffs and other accompanying measures. This is with immediate effect. Those with free funds are, with immediate effect, permitted to use these funds and other resources to import basic commodities,” Ncube said.

The move is expected to compel local manufacturers to lower their prices due to competition.

Confederation of Zimbabwe Industries president Kurai Matsheza said the measures had the capacity to cripple the economy.

“It doesn’t sound like a good policy because if there was a problem, what they should do is to reduce duties on raw materials. That move alone means the local manufacturers will not be able to manufacture the goods.

“The imported goods will be on our shelves. So the productive sector out there will be very busy filling our shelves here. So if you look at the value chains that are involved, they are killing our economy. So I don’t think that helps at all,” Matsheza said while also pointing out that the failure of the Reserve Bank of Zimbabwe’s foreign currency auction system resulted in industry failing to access US dollars.

“We import crude oil from Brazil, so we need foreign currency, but the auction has been failing to give manufactures sufficient US dollars to be able to import. On the issue of mealie-meal shortage, it has something to do with the fact that the government stopped millers from buying except the Grain Marketing Board (GMB), which created bottlenecks on the supply chain. It depends on how the government will act. The policies put in place will determine whether the situation gets back to normal or not,” Matsheza said.

Market analyst Maxwell Saungweme also added: “This statement is an admission by the government that it has failed and it is also an admission of cluelessness, policy inconsistencies and contradictions which are tell-tale signs of people who have run out of ideas. Last week, the President issued a statement that seemed to be discouraging the use of foreign currency. So this is an admission of hopelessness.”

However, economist and Zimbabwe National Chamber of Commerce (ZNCC) chief executive Christopher Mugaga said the measures announced by the Treasury boss responded well to reality.

“Ncube simply opened the floodgates for realism. If we look at our local production, look at the contribution of factories, gross domestic product and all, it has been going down. Now with the current issue, it will determine whether we will be able to satisfy this market. So I think Ncube just did the right thing,” Mugaga said.

“That statement is the reality, we need to liberalise a bit in terms of product accessibility for our consumers which is important to a certain extent. There is certainly no shocker; I’m surprised when people are surprised by that statement. I’m not sure what they expected,” he added.

Under the latest policy measures, the government bowed down to pressure from maize farmers and introduced a US dollar incentive for the grain.

Farmers have been withholding deliveries of maize to GMB demanding to be paid in foreign currency.

In his statement, Ncube said: “In the quest to incentivise farmers and encourage early deliveries of maize and other grains to the GMB, the government has taken the decision to pay the maize farmers 30% of the amount due on grain delivered in US dollars and 70% in domestic Zimbabwe dollars.

“The US dollar payment will be calculated at the prevailing willing-buyer willing-seller rate published by the Reserve Bank of Zimbabwe on the date of delivery. The payments will be backdated to the date of the first deliveries of this season’s maize to GMB.”