Zim dollar mentality lingers

HARARE - Zimbabwean products are expensive as “companies have failed to leave the Zimbabwe dollar mentality” of charging high prices, central bank governor John Mangudya said.

He said the scenario has made local products uncompetitive in offshore markets.

“There is need to adapt to the new realities of the United States dollar we are using if we are to be competitive.

Our companies have failed to leave the Zimbabwe dollar mentality behind as evidenced by high prices on products,” he said at an offshore investment conference on Wednesday.

Zimbabwe ditched its currency — ravaged by hyperinflation — in 2009 to adopt a basket of foreign currencies, dominated by the greenback.

Mangudya said local industry must change its mind-set if it is to make an impact on international markets.

“We can’t go into foreign markets because our products are expensive,” he said.

Economic experts say prices of goods and services in Zimbabwe are approximately four times more expensive than those in the region and about five times those in Europe and America.

Mangudya noted that there was need to bring foreign direct investment into the country to help revive the economy by resuscitating ailing companies that have failed to shake off a hangover of the decade-long economic crisis.

Apart from a biting liquidity crisis, Zimbabwe’s manufacturing sector has also been hit by erratic power supplies and as such, has to invest in alternative energy thereby increasing costs of production.

This has ultimately made local products uncompetitive in the region.

Shortage of long-term financing has also made retooling a tall order leaving companies stuck with antiquated equipment — creating production inefficiencies, which again lead to higher production costs.

As a result of the steep production costs and deteriorating economic conditions, hundreds of firms have closed shop in the last few years.

In his 2015 National Budget, Finance minister Patrick Chinamasa indicated that more than 4 610 companies had shut shop between 2011 and 2014 rendering more than 55 400 people jobless.

 

    Comments (6)

    Mangudya you are getting it all wrong. Pricing policy is not just a game of thump-sicking prices. There is a margin that is put on top of costs. hence, the real problem is with costs. Zimbabwe is using old production techniques that are inherently costly. Foreign companies with new technonolgy are not willing to come here because of uncaring political leadership. Hence they craft foolish laws like indegenisation, something that grade pupils n my home area will quickly find fault with. Would you tell your son to marry a wife, on condition that 51% of the week that wife will be in the father's bedroom, and only 49% or three days in a week the wife will be with proper husband??. Who under heaven can accept such glaring arrangement, let alone someone who has brains to be an investor.

    Danai Pazvagozha - 12 March 2015

    No products are being produced locally as the local industry is dead.the duties to import goods are very high so the price to the consumer will have to cater for the duty cost margin.Kunge pa fuel how can you say dzikisai mutengo imi muchikwidza duty.zvimwe zvacho zvakudawo common sense.

    Kenji - 13 March 2015

    statutory payments are inherently very high for instance a small car from japan lands $4500 Yet its CIF price is $1400.00 this is crazy. What it mearns simply is that the affected person will simply pass on the costs and it becomes a vicious cycle. Another example is on fuel landing price is 88 cents but retail price is from $1.40 upwards, there are many examples like cost of number plates, council and garvenment licenses everything is urealistically price. The root problem is that most organisations are top heavy if directors earn $15 000 (R150 000) upwards ,the money has to come from somewhere. As a nation we need to take a broad analysis of the situation.

    David Panganai - 16 March 2015

    In spite of the high costs of doing business manufacturer prices are reasonable it is the retailers that are charging dollar mentality margins.

    thomas - 16 March 2015

    If you keep increasing taxes, then the prices will continue going up. Simple!

    Uncle D - 17 March 2015

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