Business / Economy
Sharp price hikes for basic goods
16 Jun 2017 at 08:22hrs | Views
Consumers must brace for massive increases in the price of bread, maize-meal, cooking oil and sugar, hovering around 10 percent, as millers begin to comply with a government directive that requires them to add nutrients in the production of these basic products to reduce the long-term effects of poor nutrition among citizens.
Beginning next month, large-scale millers would be compelled by law to add nutrients to everyday foods such as bread, mealie-meal, cooking oil and sugar to enrich their consumers' diets.
Otherwise known as the Mandatory Food Fortification Programme, the initiative seeks to eliminate the prevalence of iodine deficiency disorders in Zimbabwe, especially among the poor.
Iodine anaemic deficiency occurs when an individual is not consuming enough iron, or if a person is losing too much iron, resulting in the body failing to produce enough hemoglobin.
Hemoglobin refers to a red protein, responsible for transporting oxygen in the blood. Once that protein is in short supply in the body, it leads to extreme fatigue, weakness, pale skin, chest pains, fast heartbeats, short breath, headaches, poor appetite and brittle nails, among other symptoms.
Failure to correct this situation could result in heart problems, premature births in pregnant women (and low birth weight babies), and generally stunted growth in infants and children. Iron deficiency is also associated with susceptibility to infections.
While government's intentions could be noble, this policy will inadvertently trigger price increases because manufacturers will be forced to buy the nutrients required to fortify their products.
Not just that, millers will also be forced to import the requisite equipment and spend more money on training to comply with the directive, failure of which they would incur heavy penalties.
The Grain Millers Association of Zimbabwe (GMAZ), which represents all millers in the country, revealed this week that prices for bread, maize-meal, cooking oil and sugar will go up by about 10 percent, an increase, which is way above inflation.
The net effect of it is that the consumer would have to fork out more for the same product at a time when the majority of the population is living below the breadline, earning less than $1 per day.
It is unavoidable that the consumer basket for the month of August will shoot through the roof in response to the price adjustments, thus stoking the inflation fires.
GMAZ chairperson, Tafadzwa Musarara, confirmed the impending price escalations, saying while their computations were still to be completed, "we are expecting it (price increases) to be above 10 percent".
Government does not think the price adjustments would be significant.
The ministry of Health and Child Care, which is driving the Mandatory Food Fortification Programme, expects an "invisible price" increase of between 0, 2 percent and 1,3 percent.
To guard against wild price increases, food fortifications and equipment imported for this purposes would be exempted from paying duty at the ports of entry.
In a letter to GMAZ dated June 6, 2017, Health and Child Care minister David Parirenyatwa said their consultations have shown that significant price changes would be avoided.
He said: "Invisible price of 0,2 percent to 1,3 percent of wholesale costs are realised. The average annual cost per person of average consumption is approximately US$0,29 for maize-meal and US$0,15 for wheat flour, resulting in minute traction of inflation rates of foods on the market. These inflation rates are further reduced when duty fees are exempted from food fortifications and equipment imports," said Parirenyatwa.
GMAZ has trashed the ministry's projections, saying government was being too conservative to the point of ignoring essential details.
The association argues that apart from incurring unbudgeted for expenses in bringing into the country the food fortifications and equipment, millers would also be required to import the chemicals that go into the foodstuffs as well as buying the foreign currency on the parallel market, where those with the scare resource are charging buyers a huge premium.
"We are disputing the ministry figures. They do not own the products and how did they come up with those margins? There is also the cost of buying the machinery that will need to be recovered; and the money for buying the foreign currency," argued Musarara.
"We have already written to bakers, informing them of the increase in the price of flour, and that means that the price of bread will increase. In other countries where they are implementing or have implemented food fortification, it is the development partners that cover those, and it is not industry, for example in Zambia."
Currently, there is no company in Zimbabwe that is manufacturing fortification chemicals and machinery, which means that these have to be sourced beyond the country's borders.
"This means we will be importing everything," Musarara said. "They should capacitate these pharmaceutical companies for the process to be cheaper. And we do not even have laboratories to test these foods here. We are not against food fortification but the way it is being executed because it is being done in a hurry and there has not been a proper consultation."
On May 11, 2017, GMAZ had written to government requesting for the deferment of the programme, saying millers were ill-prepared to implement it.
The Daily News can exclusively reveal that the request was shot down by the authorities, hence come July 1, it would be all systems go.
In dismissing the request from the millers, government argued that it had consulted widely before giving the programme the thumbs up and that the prevalence of iodine deficiency had reached alarming levels such that the programme was long overdue.
In preparation for the launch of the programme, government said nationwide campaigns were conducted to educate citizens about the initiative.
Parirenyatwa said government had also waived the requirement for budding industries for the time being to give them breathing space.
"The government is very much sensitive to middle and small-scale industries who could be facing challenges in the current economic environment. As a ministry, we have put in place a mechanism for these middle and small industries that require further time to prepare for mandatory food fortification to seek special waivers for a certain period that is granted by the permanent secretary of Health," he said.
He claimed that big companies were in a position to start fortifying their products, adding that some had already started on the programme.
This is likely to have the effect of creating pricing distortions on the market, which might result in the established companies losing their market share to small-scale enterprises.
This might lead to job losses in some cases, and job gains for those small companies that would have gained market share.
"As a ministry, we cannot negotiate on the importance of such an initiative to address gross micronutrient deficiencies, thus we have mandated every food producer to fortify maize-meal, wheat flour, sugar and cooking oil with specific micronutrients," wrote Parirenyatwa.
"The ministry of Health and Child Care appreciates your active role and collaboration in this important national initiative to address the micronutrient burden our nation is currently facing," he concluded.
Food experts say the addition of highly nutritious foods and supplements to the diets of poor mothers could help reduce child mortality and malnutrition.
Notwithstanding, price increases would be unavoidable.
For a country that recently achieved a bumper harvest in as many years, the price increases would be ironic.
Basic economics dictate that prices fall when there is a glut of products on the market. In this case, the reverse would be true due to government policy encroachment into market forces.
Zimbabwe's consumer prices increased by 0,48 percent year-on-year in April 2017 from a 0,21 percent gain in March.
It was the highest inflation rate since November 2013.
On a monthly basis, consumer prices rose by 0,05 percent after increasing 0,03 percent in March.
The inflation rate averaged 0,85 percent from 2009 until 2017, reaching an all time high of 5,30 percent in May of 2010 and a record low of -7,50 percent in December of 2009.
Beginning next month, large-scale millers would be compelled by law to add nutrients to everyday foods such as bread, mealie-meal, cooking oil and sugar to enrich their consumers' diets.
Otherwise known as the Mandatory Food Fortification Programme, the initiative seeks to eliminate the prevalence of iodine deficiency disorders in Zimbabwe, especially among the poor.
Iodine anaemic deficiency occurs when an individual is not consuming enough iron, or if a person is losing too much iron, resulting in the body failing to produce enough hemoglobin.
Hemoglobin refers to a red protein, responsible for transporting oxygen in the blood. Once that protein is in short supply in the body, it leads to extreme fatigue, weakness, pale skin, chest pains, fast heartbeats, short breath, headaches, poor appetite and brittle nails, among other symptoms.
Failure to correct this situation could result in heart problems, premature births in pregnant women (and low birth weight babies), and generally stunted growth in infants and children. Iron deficiency is also associated with susceptibility to infections.
While government's intentions could be noble, this policy will inadvertently trigger price increases because manufacturers will be forced to buy the nutrients required to fortify their products.
Not just that, millers will also be forced to import the requisite equipment and spend more money on training to comply with the directive, failure of which they would incur heavy penalties.
The Grain Millers Association of Zimbabwe (GMAZ), which represents all millers in the country, revealed this week that prices for bread, maize-meal, cooking oil and sugar will go up by about 10 percent, an increase, which is way above inflation.
The net effect of it is that the consumer would have to fork out more for the same product at a time when the majority of the population is living below the breadline, earning less than $1 per day.
It is unavoidable that the consumer basket for the month of August will shoot through the roof in response to the price adjustments, thus stoking the inflation fires.
GMAZ chairperson, Tafadzwa Musarara, confirmed the impending price escalations, saying while their computations were still to be completed, "we are expecting it (price increases) to be above 10 percent".
Government does not think the price adjustments would be significant.
The ministry of Health and Child Care, which is driving the Mandatory Food Fortification Programme, expects an "invisible price" increase of between 0, 2 percent and 1,3 percent.
To guard against wild price increases, food fortifications and equipment imported for this purposes would be exempted from paying duty at the ports of entry.
In a letter to GMAZ dated June 6, 2017, Health and Child Care minister David Parirenyatwa said their consultations have shown that significant price changes would be avoided.
He said: "Invisible price of 0,2 percent to 1,3 percent of wholesale costs are realised. The average annual cost per person of average consumption is approximately US$0,29 for maize-meal and US$0,15 for wheat flour, resulting in minute traction of inflation rates of foods on the market. These inflation rates are further reduced when duty fees are exempted from food fortifications and equipment imports," said Parirenyatwa.
GMAZ has trashed the ministry's projections, saying government was being too conservative to the point of ignoring essential details.
The association argues that apart from incurring unbudgeted for expenses in bringing into the country the food fortifications and equipment, millers would also be required to import the chemicals that go into the foodstuffs as well as buying the foreign currency on the parallel market, where those with the scare resource are charging buyers a huge premium.
"We are disputing the ministry figures. They do not own the products and how did they come up with those margins? There is also the cost of buying the machinery that will need to be recovered; and the money for buying the foreign currency," argued Musarara.
"We have already written to bakers, informing them of the increase in the price of flour, and that means that the price of bread will increase. In other countries where they are implementing or have implemented food fortification, it is the development partners that cover those, and it is not industry, for example in Zambia."
Currently, there is no company in Zimbabwe that is manufacturing fortification chemicals and machinery, which means that these have to be sourced beyond the country's borders.
"This means we will be importing everything," Musarara said. "They should capacitate these pharmaceutical companies for the process to be cheaper. And we do not even have laboratories to test these foods here. We are not against food fortification but the way it is being executed because it is being done in a hurry and there has not been a proper consultation."
On May 11, 2017, GMAZ had written to government requesting for the deferment of the programme, saying millers were ill-prepared to implement it.
The Daily News can exclusively reveal that the request was shot down by the authorities, hence come July 1, it would be all systems go.
In dismissing the request from the millers, government argued that it had consulted widely before giving the programme the thumbs up and that the prevalence of iodine deficiency had reached alarming levels such that the programme was long overdue.
In preparation for the launch of the programme, government said nationwide campaigns were conducted to educate citizens about the initiative.
Parirenyatwa said government had also waived the requirement for budding industries for the time being to give them breathing space.
"The government is very much sensitive to middle and small-scale industries who could be facing challenges in the current economic environment. As a ministry, we have put in place a mechanism for these middle and small industries that require further time to prepare for mandatory food fortification to seek special waivers for a certain period that is granted by the permanent secretary of Health," he said.
He claimed that big companies were in a position to start fortifying their products, adding that some had already started on the programme.
This is likely to have the effect of creating pricing distortions on the market, which might result in the established companies losing their market share to small-scale enterprises.
This might lead to job losses in some cases, and job gains for those small companies that would have gained market share.
"As a ministry, we cannot negotiate on the importance of such an initiative to address gross micronutrient deficiencies, thus we have mandated every food producer to fortify maize-meal, wheat flour, sugar and cooking oil with specific micronutrients," wrote Parirenyatwa.
"The ministry of Health and Child Care appreciates your active role and collaboration in this important national initiative to address the micronutrient burden our nation is currently facing," he concluded.
Food experts say the addition of highly nutritious foods and supplements to the diets of poor mothers could help reduce child mortality and malnutrition.
Notwithstanding, price increases would be unavoidable.
For a country that recently achieved a bumper harvest in as many years, the price increases would be ironic.
Basic economics dictate that prices fall when there is a glut of products on the market. In this case, the reverse would be true due to government policy encroachment into market forces.
Zimbabwe's consumer prices increased by 0,48 percent year-on-year in April 2017 from a 0,21 percent gain in March.
It was the highest inflation rate since November 2013.
On a monthly basis, consumer prices rose by 0,05 percent after increasing 0,03 percent in March.
The inflation rate averaged 0,85 percent from 2009 until 2017, reaching an all time high of 5,30 percent in May of 2010 and a record low of -7,50 percent in December of 2009.
Source - dailynews
