HARARE – Some Zimbabwe food prices have fallen slightly, after government decreed fuel retailers to cut the price of petrol and diesel by up to 7,5 percent after a tax cut.
High fuel prices have caused the costs of goods in shops to stay too high, and the latest edict is part of a drive by the new government of President Emmerson Mnangagwa to slash prices that had rocketed ahead of key a general election due in four to five months.
A cross-section of basic products has begun shedding price values against prior week pronouncements to that effect by industry bodies the Confederation of Zimbabwe Industries (CZI) and Zimbabwe National Chamber of Commerce (ZNCC).
The prices are reported to have knocked off by an average of -4 percent since the fuel price adjustments.
The Consumer Council of Zimbabwe, which measures monthly changes for a basket of basics, said there has been a very, very small drop in prices but still remain too high than what is acceptable.
Meat prices were the biggest faller among the commodities measured, while most locally produced commodities remained stagnant or marginally pushed down.
“We found that in most supermarkets, things have started going down but they are still not at a level that we are happy with, the level they were in around May last year,” CCZ executive director Rosemary Siyachitema told State TV.
“There is still room for retailers and manufacturers to look at their costing and put real prices that are acceptable on the market,” she said, adding petroleum suppliers also took heed of the reduction in excise duty and reduced fuel prices.
Energy and Power Development minister Simon Khaya Moyo said two weeks ago the government had fixed petrol price at $1,35 per litre, down from $1,41 while a litre of diesel now retails for $1,23 from $1,33.
The price cut came just after government had slashed the import duty on fuel by as much as 17 percent.
“I expect and trust that this important decision by the government shall be implemented by all concerned parties. I therefore expect nothing less than immediate compliance,” Moyo said in a statement.
Key industry representative bodies CZI and ZNCC responded to government’s move to lower excise duty on fuel imports by issuing a collective statement saying it shall incorporate fuel price reduction into its pricing structures, which will result in the pricing of some basic commodities falling by ranges of 1 percent to 5 percent.
It went further projecting that after this cut, the overall consumer price index will fall further from the 1,2 percent increment experienced over the 2016-17 period.
On the surface, it clearly is rational and typical for business to inform its pricing using the cost structure as a basis, thus implying that a variation in cost may result in price shifts.
Financial research firm Equity Axis said it commended the price climb-down and hope that it can only be sustained for stability purposes.
“We, however, maintain our view that the present key driver of inflation in the economy is incessant money supply growth of 2017 fuelled by open market operations, designed to aid excess budget expenditure,” Equity Axis said in a commentary.
“Although government plans to reduce its deficit this year, pressure in an election year may result in an even wider deficit which can only be funded through issuance of more government paper.
“While the deficit per se may not be the problem, the source of its funding is critical in determining macro-economic stability.
“We therefore view the gesture by industry to lower prices as being driven by a combination of factors such as subsiding lean period demand and most importantly pressure from government for industry to justify previous price hikes.
“The later is tantamount to soft price controls which cannot be relied on to sustainably stabilise the market. Current improvement in confidence in the market, however, reduces speculative behaviour which had a huge influence on stoking runaway prices.”
Veteran economic John Robertson said he hopes this is just the start of a long list of cuts.
“With the lower excise duties in place, fuel costs in Zimbabwe are still much higher than anywhere else in the region,” he told the Daily News.
“Finished goods prices would come down further if other import duties were reduced, if interest rates were lower and the companies did not have to pay for so many permits and licences.”
The new president has promised to refocus the country more on the economics side and less on politics which may suggest a varying outlook.
Mnangagwa has engaged in continuous international re-engagement manoeuvres. In the previous week, government met with representatives from London and a re-admission into the Commonwealth is on the cards.
On January 23, the European Union (EU) informed the new Zimbabwean government that it is ready to review its ties with the country and support its re-engagement with international financial institutions on the basis that there is a clear plan for political and economic reforms.
Elections are considered an important first step in mending relations.
After defaulting on its foreign debt in 1999, sanctions were put in place and were based on alleged electoral fraud and the violent seizure of white-owned farms.
The EU has continuously increased sanctions on the ruling party, military figures and State-owned firms since 2009.
The government of Zimbabwe has not received any financial support from the EU and funding has only been directed towards charities since the imposition of sanctions.
NKC African Economics analyst Sibongiseni Nkota said the removal of sanctions can bring about positive change to the economy of Zimbabwe.
“The country can potentially attract new foreign investors into the market, which will in turn stimulate economic growth,” Nkota said.
“The removal of sanctions could also help exporters gain access to the EU market and eliminate hurdles faced by local businesses when attempting to use international financial services.
“Broader structural changes will be required to support sustained economic growth in the country, and this can be brought about by developing good economic policies — initial signs are positive regarding the latter.” – Daily News