Fears of hoarding as price increases loom

HARARE – The looming increases in the prices of certain basic commodities due to a government directive to millers and manufacturers to add nutrients in their production is seen fuelling hoarding and creating a black market for the basics.

This comes as large-scale millers of mealie-meal and flour as well as manufacturers of sugar and cooking oil will be compelled by law to add nutrients to their products, effective July 1, 2017 to reduce the long-term effects of poor nutrition.

The Grain Millers Association of Zimbabwe (GMAZ), which represents all millers across the country, expects the price of mealie-meal to rise by 10 percent although the Health and Child Care ministry anticipates an “invisible price of 0,2 percent to 1,3 percent”.

In the intervening period, analysts have warned of massive hoarding by those who can afford non-perishable groceries such as cooking oil and sugar to beat the impending price increase.

The hoarding might extend to flour, used to manufacture bread, which dominates tables during breakfast.

Should there be the hoarding of basics, this could result in products disappearing from supermarket shelves, hence creating a parallel market for the same products, where consumers would have to pay top dollar to access them.

Zimbabwe National Chamber of Commerce chief executive officer, Christopher Mugaga, told the Daily News yesterday that the directive will no doubt burden consumers and fuel the black market.

“What makes the situation difficult is that the United States dollar is already over-valued. The prices have already been higher than those in the region. For example, in Botswana, a loaf of bread goes for $0,60, while in Zimbabwe it’s sold for $1. A further price increase will effectively be a burden on consumers,” Mugaga said, adding some price hikes were a result of profiteering by shop owners because prices are fairly low in the informal market.

“The message to retailers is that they have to abandon their culture of overpricing. Our goods are already overpriced. If anything, they have to reduce the prices. They have to put their houses in order.”

Otherwise known as the Mandatory Food Fortification Programme, the initiative to add nutrients on basic goods seeks to eliminate the prevalence of deficiency disorders in Zimbabwe, especially among the poor.

While government’s intentions could be noble, this policy will inadvertently trigger price increases because manufacturers will be forced to buy nutrients and the necessary equipment required to fortify their products.

Early this month, GMAZ told a stakeholders conference on command agriculture that US$104 million would be required to bring in the nutrients and equipment.

About $20 million would be required to import machinery to do the fortification, and a monthly bill of $7 million for the nutrients, which would amount to $84 million per annum.

Not just that, millers will also be forced to spend more on training to comply with the directive, failure of which they would incur heavy penalties.

This, however, has downstream effects which will be felt by over-taxed consumers who will have to fork out more at a time when the majority of the population is living below the breadline, earning less than $1 a day.

Mugaga said there was need for the private sector and government to exercise fiscal rectitude in order to balance the process.

“The private sector and government must not over-spend on unnecessary imports, because the agriculture, tourism and manufacturing sector is not growing at the ideal rate as expected,” Mugaga said.

While the government’s food fortification programme has been touted as the way to go, there are fears that this would also fuel smuggling of goods, which will in turn be sold on the black market at lower prices.

Consumer Council of Zimbabwe executive director, Rosemary Siyachitema, said there was need for dialogue around the food fortification issue to ensure its proper and fair implementation.

“I think we need to separate these issues and not be dismissive about it. We must understand why there is this food fortification. It came through the Health ministry after there were concerns on the impact of the food that was being produced on the growth of children. In other countries, it’s an important thing in terms of the health of the children.

“I think there has to be dialogue about how important this is and on how the process has to be done, to understand its relevance and how this will be facilitated,” Siyachitema said.

She added that everything positive comes through dialogue.

“Those who then sell the products must not hike the prices, because it’s not just about hiking the prices. Already the prices are high,” she said, adding that this was a matter of morality and principle.

GMAZ is arguing that by imposing food fortification without proving the necessary financial support, government was forcing its members to incur an import bill estimated at about US$20 million to bring into the country the requisite machinery to do the fortification, and a monthly bill of $7 million of the nutrients.

“These funds are not available, and we pray that this obligation be waived. If this mandatory fortification programme is enforced from 1 July 2017 as being threatened, we will see many millers unable to continue production, especially our small-scale black indigenous grain millers... Mandatory fortification cannot and must not be allowed to come and finish them off,” GMAZ chairperson, Tafadzwa Musarara said on June 7.

Government has since rebuffed GMAZ’s petition, saying there was no going back on the programme.

The only concession made by government is to waive the fortification requirement on small-scale millers, in what might create price distortions on the market.

Comments (1)

Thats the problem when you have a government which only understand, limit control and criminalise.

Sinyo - 19 June 2017

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