HARARE – Zimbabwe Finance Minister Mthuli Ncube has ruled out enforcing price controls despite the escalating prices of goods in the shops saying it does not work and would be a disaster.
Responding to questions in Parliament today, Ncube said: “One thing that we could not do by the way, is price controls; that would be a disaster. It never works.”
He said that the government was working on narrowing the gap between the official and parallel market rate as it allowed people arbitrage in that they obtained foreign currency at the official rate but charged goods on the black market rate.
The government did not condone this but it was difficult to deal with it.
“You know when there is arbitrary opportunity, often that tends to be shared through the ecosystem. So in terms of collusion of individuals and companies – it is happening. That makes it difficult to enforce the law through a single point and we have to attack the whole ecosystem if we want to succeed,” Ncube said.
The official rate is now $105 to the United States dollar while the black market rate is between $175 and $200.
Q & A:
HON. DR. KHUPE: Thank you Mr. Speaker Sir. My question is directed to the Minister of Finance and Economic Development. Hon. Minister, prices of basic commodities have astronomically gone up beyond what many families can afford and it is very clear that as we move towards the festive season, prices are going to be increasing even more higher to the extent that even with bonuses, workers will not be able to touch and feel those bonuses. What measures are you putting in place to mitigate against these price increases so that at least people can afford to buy something even as they are going to be receiving bonuses? If you do not do anything, people will not be able to touch and feel those bonuses.
THE MINISTER OF FINANCE AND ECONOMIC DEVELOPMENT (HON. PROF. M. NCUBE): Thank you Mr. Speaker Sir. I thank the Hon. Member for the question on the galloping prices which are hurting the poor. It is certainly true but the causes have been largely the gap between the parallel market and the official rate. So, the first order of business is to tackle that gap between the parallel market and the official auction rate. We have put in place several measures. First of all, is to eliminate the gap that exists in the allocations on the auctions. We did that successfully this week where Treasury stepped in to clear the backlog making sure that there is certainty and credibility around the auction.
The Central Bank issued a statement yesterday attesting the fact that we had cleared this backlog as Treasury. The way we do it is not that we are handing money over to the private sector through the auction but rather we are exchanging the USD that we have that we collect from taxes for the ZWL that we need to settle civil servants’ salaries and other ZWL needs.
You have seen that we have increased interest rates to make it more expensive for the speculators to speculate. We are implementing other measures going forward to make sure that we reduce the cost of speculation and dampen the arbitrage opportunities that come with that.
On the simple cushioning front through this Parliament, we will be requesting an adjustment in the tax bands as I present the budget next week just to make sure that those who are at the lower levels in terms of salaries can be cushioned through a tax relief. We are also going to request that Parliament approves an increased social protection budget which covers things be it BEAM, health support for the vulnerable, cash transfers as well. We will be requesting an increased budget for the support for the vulnerable. So, we will try to attack this issue from different angles in terms of trying to meet the needs of the vulnerable from the price increases.
One thing that we could not do by the way, is price controls; that would be a disaster. It never works; we make strategies on the shelves. I think these kinds of measures that I have outlined are perhaps the best way to go as package of measures. I thank you.
HON. PETER MOYO: Thank you Mr. Speaker. People who are behind parallel markets are known, what is the Government doing about that? The Minister is aware of those culprits behind parallel market. I thank you.
HON. PROF. M. NCUBE: Most of the culprits are known, some of them have been arrested. Certainly, the people are very cunning because they enjoy the proceeds so they continue with what they are doing but they are being arrested.
We have a law SI 127 which is helping us to do what we are doing so that we obey the law. It is not easy, some come to the auction and we would want to know who is receiving the money. Some come weekly, so we want to see whether there is no criminality which is happening around there. We are trying our best so that the law is implemented.
As we speak, it is one of the measures which we have taken that the law should be adhered to. I thank you.
HON. MARKHAM: Thank you Hon. Speaker and good afternoon. Hon. Speaker, I would just like to supplement to the Minister – so long as our incomes are working on the official rate and our expenditure is on the parallel market, we have a serious problem and this is unsolvable until it is policed and enforced. I do not know why the Ministry cannot push that the monies taken from the auction rate are charged into the system at the rate they were bought because there is no shop in town that is not charging on the parallel rate. Can the Minister not enforce those companies that are accessing money on the auction rate to acquit their forms at that rate and not the parallel rate? I thank you.
HON. PROF. M. NCUBE: Mr. Speaker Sir, I thank Hon. Markham for his question. He is correct in the observation that there are individuals, companies and others who source money from the auction at the auction rate that he sees published every week, but the prices that you find in their shops are different. They are parallel market prices and this is not on. We do not condone that. In fact, we are trying to deal with that. I agree with him that there should be better enforcement when it comes acquittals. Before the person comes back to the auction, there should also be a follow up and an audit. That is what I mentioned earlier. So I agree with him that we should enforce better. We will continue to do so. It is never easy. You know when there is arbitrary opportunity, often that tends to be shared through the ecosystem. So in terms of collusion of individuals and companies – it is happening. That makes it difficult to enforce the law through a single point and we have to attack the whole ecosystem if we want to succeed, but I appreciate his suggestion and his concern. We are concerned, I am concerned. I thank you.
HON. NDUNA: Thank you Mr. Speaker Sir. My supplementary to the Hon. Minister, where I come from, in particular the people in some areas have no access to information from the print and radio media, but I make sure I give them the Hansard after Parliament. Would it please the Minister to elaborate, espouse on the bonuses that are United States dollar based that you are going to give to civil servants which we saw in the print and in electronic media, as well as on television so that the people I represent can get to hear first hand from you?
THE HON. SPEAKER: Unfortunately, that supplementary question does not arise in terms of the price regime raised by Hon. Khupe. Please take your seat.
HON. GONESE: Supplementary Mr. Speaker Sir. In your response Hon. Minister, you have indicated that there should be better controls and also better investigation on those companies which would have accessed foreign currency at the auction rate. However Hon. Minister, there are individuals…
THE HON. SPEAKER: Hon. Member, you are now debating. Ask the supplementary question.
HON. GONESE: Hon. Minister, what happens to those companies which are not able to get all their requirements at the auction rate as a result of which they claim to have purchased some of the currency on the parallel market and some on the auction rate? How do you deal with that situation in terms of the policing and the controls that you have alluded to Hon, Minister?
HON. PROF. M. NCUBE: What we are policing is really around the foreign currency that we have provided. It is a lot easier to do that. That is what we follow up on but if individuals are doing blended pricing and so forth, again we want to understand it but really we want to make sure that our foreign currency is not a contributor to parallel market prices that we see prevailing. That is really our main concern and it is much easier to prove that than blended prices or the other prices, but the issue of enforcement is never easy at all.
We have FIU, the police, we have ZIMRA to an extent, we have all the law enforcement agencies out there but people are still managing to escape. Those are the facts. It just shows you how difficult it is especially if the incentives and the arbitrary profits are being distributed among many beneficiaries, then everyone has an incentive to cover up for each other. It is never easy, but we will continue with the hard work especially around the sources that we would have provided ourselves through the auction. I thank you.
