So dire is the situation that some baking industry executives told the Zimbabwe Independent this week that consumers should brace for price hikes in the coming months to guarantee a flawless supply.
However, the National Bakers Association of Zimbabwe (NBAZ) said yesterday that for the festive season, the industry had enough stocks of wheat to meet demand.
This is the latest in a series of warnings by key industries in the past few months that Zimbabwe’s prolonged energy crisis could reverse significant progress towards economic recovery reported by most sectors in the final quarter of 2021.
In the past few weeks, the power crisis that returned to haunt domestic and industrial consumers mid-year has intensified, with companies enduring prolonged power cuts that have grounded production and exerted fresh pressures on an economy already struggling to shake off the effect of Covid–19 induced hard lockdowns.
In an interview with the Independent, NBAZ president Dennis Walla said authorities must immediately intervene to make sure bakers access Zimbabwe dollar-priced fuel.
Fuel available on the market is generally being traded in United States dollars because importers with free funds have been given the greenlight to bring in the fuel and trade in foreign currency.
But to assist companies that mostly sell their products in the free-falling Zimbabwe dollar, the government had undertaken to provide local-dollar-priced fuel, which they were expected to access and sustain operations.
This plan has generally failed, and bakers, along with several other industries facing a similar predicament, say they have been over-stretched by high costs.
Zimbabwean firms use their local dollars to purchase foreign currency on the black market at extortionist rates, so that they can purchase US-dollar-priced fuel and other requirements.
“We have been promised Zimbabwe-dollar-priced fuel, which was going to be a good move when it comes to doing business,” Walla told the Independent this week.
“We have not yet accessed that fuel. What is available to us now is the US-dollar-priced fuel. And this becomes expensive for the sector to operate full throttle. We cannot go to the foreign currency auction system and say we want forex to buy fuel. This is a (big) cost driver and this needs to be addressed,” Walla added.
The high energy costs have compounded an already difficult situation for bakers and other industries, who have recently seen a significant rise in utility costs by up to 300%. Walla said the other challenge was unavailability of electricity. He said the sector could provide backup power through diesel power generators.
But apart from troubles in accessing the fuel, this was an expensive option.
“The other challenge we are facing is that we are having electricity blackouts for many hours and this turns to affect us because electricity is key in the sector and we can’t continue to rely on backup generators as it is too expensive and this might impact bread prices,” he said.
In its state-of-industry report released two weeks ago, the Zimbabwe National Chamber of Commerce (ZNCC) also raised fears over the energy crisis.
“Electricity is one of the main enablers of economic activities in any business environment,” the ZNCC said.
“Zimbabwe’s rank of 167 (in a global study of doing business costs) and score of 48,6 show the extent to which the country’s performance on this component is very poor and discouraging to any potential investor, both local and foreign investors. The best performers in the SADC region are Mauritius with a global rank of 28 (and score of 88) followed by Namibia (ranked 76 and score of 78,3) and Tanzania with a rank of 85 and a score of 74,9. Zimbabwe is characterised by erratic power supplies especially during the winter period where agricultural activities such the winter wheat crop will be at its most critical stage.
During this critical period, electricity is prioritised to the agricultural sector leaving other sectors without energy. Although electricity tariffs are among the lowest in the Southern African Development Community region, electricity supply has been the average business person’s worst nightmare. Erratic power supplies have resulted in huge losses for most businesses over the years due to interrupted operations, lost time and revenue, damage to machines and lost data,” the ZNCC said.
The country has off-late seen various price hikes ranging from fuel and basic commodities such as bread.
In October this year, wheat producers hiked prices by 16% per metric tonne, which is likely to trigger increases in the prices of flour and bread.
The price of imported wheat went up to US$510 from US$440 per tonne, according to the NBAZ.
A loaf of bread already costs between ZW$160 and ZW$175 as the prices continue skyrocketing, with the baking sector predicting that there would be another increase to cover the rising costs.
The Zimbabwe Energy Regulatory Authority (Zera) has reviewed the price of fuel upwards several times since the beginning of the year citing an increase in oil prices on the international markets.