Zimbabwe heading for post-election economic melt-down as prices sore

THE prices of basic commodities have risen sharply since elections held on July 30 to levels that are too high for a dollarised economy.

BY BLESSED MHLANGA

The bout of inflation is blamed on excessive government spending and a critical shortage of foreign currency to procure imports and to stabilise bond notes, which have since been devalued by up to 80% on the parallel market.

President Emmerson Mnangagwa, who is in China for the Forum on China-Africa Co-operation (Focac), is seeking a $2 billion bailout to ease the crisis of foreign currency liquidity and cash

The shortage of bond notes also appears to have worsened on the formal market, despite new, crisp notes being found on the parallel one.

Yesterday, stakeholders blamed the crisis on Mnangagwa’s failure to address “legitimacy” issues and non-appointment of a Cabinet, thus leaving the country on auto-pilot.

Zanu PF legal secretary Munyaradzi Paul Mangwana admitted that the ruling party was equally worried over the trend, adding there were engagements behind the scenes to deal with the economic slump even in the absence of Cabinet.

“We obviously are not happy if the prices are going up, we are not happy at all … it doesn’t mean that when there is no Cabinet, there is no government. Permanent secretaries are there, ministries are there,” he said.

Mangwana said Mnangagwa could not appoint a Cabinet before Parliament was sworn-in, but could also not miss Focac, a platform for him to structure deals that have the potential to revive the ailing economy.

“The President appoints ministers from Members of Parliament and no single Member of Parliament has been sworn-in and they are all parliamentary-elect right now … Zimbabweans should be patient,” he said.

Mangwana said government would, upon his return this week, talk to industrialists to appreciate the cause of the price hikes in the past few months and then seek solutions to the massive problems.

“Obviously, government will act, but the first stance is persuasion, talk to industrialists and find out why prices are going up. We would like the process to be stable,” he said.

But MDC Alliance secretary-general Douglas Mwonzora said “darker days” were in the offing for Zimbabwe, following a disputed election, calling on Zanu PF to move quickly to address its legitimacy issues.

“We are headed for an economic catastrophe. The prices of basic commodities have shot up and there are massive job losses looming. It shows that Zanu PF is not the answer to the current economic quagmire we find ourselves in. It is important to redress certain fundamental issues, including the chronic issue of legitimacy and respect of the people’s will,” he said.

Mwonzora took potshots at Mnangagwa, accusing him of flying out of the country for Focac before appointing a Cabinet, thus leaving the country on “auto-pilot”.

“The country right now is clearly on auto-pilot with the President having gone AWOL. He has not attended to the appointment of Cabinet, leaving a policy gap, lack of confidence and free-for-all which is now manifesting in the failing of the bond note, price hikes and spinning economy which Zanu PF is clueless to contain,” he said.

Zimbabwe Congress of Trade Unions secretary-general Japhet Moyo warned this could trigger industrial action and unrest if urgent solutions were not found to stem the massive haemorrhage of workers’ earnings.

“This is reflective of the failure of the bond note and shortage of cash which has eroded disposable income for workers. They get their salaries from banks and these prices are eating into our salaries and the disposable income of the workers is being eroded over the years,” he said.

Moyo said there had been no communication between workers, government and employers owing to the collapse of the Tripartite Negotiating Forum, which last met two years ago.
“That missing link has seen us fail to get information on what is informing these price hikes, while salaries are stagnant, this could trigger job losses. There needs to be harmony between workers and employers, especially in times like these,” he said.

Reserve Bank of Zimbabwe (RBZ) governor John Mangudya, who is part of Mnangagwa’s delegation in China, however, insisted that the bond note had not failed.

He attributed the current shortages to what he described as “a mismatch between supply and demand of cash in the market hitting the economy”.

“It’s not about the bond notes, but about the disparity between the quantity of money in circulation and the demand of foreign exchange. As monetary authorities, we are putting in place foreign exchange facilities to the amount of $400 million to increase the supply of forex to meet demand,” he said.

Confederation of Zimbabwe Retailers Association president Denford Mutashu, however, said there was no need to panic as the price hikes were temporary and could be stemmed by a Cabinet announcement and monetary policy correction.

“The public should not panic about the temporary price increases being experienced on the market on selected products. Most manufacturers have cited shortage of foreign currency and the obtaining parallel market premiums. It will be folly to continue to think that the cash parallel market would subsist,” he said.

“However, it is also worrying that while RBZ has so far done so well to allocate the 30% of the forex they retain, 70% retained by banks remains a mystery. This could go a long way in dealing with these issues.”

Mutashu said the beef industry was being hit hard by a foot-and-mouth outbreak.

“Beef producers have attributed the increase of beef prices to foot-and-mouth disease in parts of Mashonaland Central, which limits movement of cattle as government moved to contain it. However, it is prudent that the President announces Cabinet urgently, and a competent one for that matter. The new Cabinet will certainly spur confidence,” he said.

Delta Beverages company secretary Alex Mahamure allayed fears that there could be an increase in prices of their products, saying although they had been hit hard by foreign currency shortages, they would not drop production levels.

“It’s a given that our operations are being affected by shortages of foreign currency. Everyone is being affected. There is little access to foreign currency … we operate in US$, you can’t have a spike of prices in that currency. That’s not how we work,” he said.

Confederation of Zimbabwe Industries president Sifelani Jabangwe said there was no need to press the panic button, saying the outlook was actually bright for industry, with capacity having improved from last year.

“Cement is more to do with supply side constrains, because manufacturers have had technical challenges which they are working on and, unfortunately, it happened more or less around the same time for Lafarge which had a technical problem with their silos and then PPC also had a specific problem, so they have not increased their prices, but it’s the speculators who are doing the usual,” he said.

Jabangwe said the prices of products in the food basket monitored by government and industry have remained stable and will not be spiking anyti
me soon.

“The other products, we sat down with the Consumer Council of Zimbabwe. The other products have remained more or same like in the basket of goods, they have remained within $8 of what they were in January. So those are the basics, those are the important goods. Remember, we have about 14 products monitored by government. The other ones may go up and down owing to currency issues on the black market,” he said.

Source: News Day