News / National
Greedy businesses caught out
30 Apr 2017 at 09:07hrs | Views
THE National Competitiveness Commission (NCC) - former National Incomes and Pricing Commission (NIPC) - and the Zimbabwe Revenue Authority (Zimra) are agreed that local retailers are extortionately pricing their goods and preying on local consumers, especially after the abortive 15 percent tax on the price of basic commodities earlier this year.
Much of the price increases were effected after Government gazetted Statutory Instrument (SI) 20 of 2017, which put a 15 percent Value Added Tax (Vat) on beef, eggs, milk and margarine among other basic commodities. But 70 days after the planned tax was rescinded through SI 26A - which repealed SI 20 - businesses have not yet reviewed their prices.
While steering clear of advocating for price controls that have historically proved to be ruinous, NCC and Zimra indicated that Government might need to effectively cushion consumers from greedy businesses by enforcing the law. Many businesses have been caught out by a survey that was conducted by the NCC during the first quarter of the year.
However, the Commission says the current price increases are a result of many factors that are presently affecting businesses. "The Commission attributes the price increases to a number of factors such as 10 percent to 15 percent increment from producers to circumvent foreign payment delays, effects of 15 percent value added tax on certain commodities, bond note speculation, foreign currency shortages, increase in the price of some raw materials on global market, fuel price increases, among other factors," it said in a statement last week.
Notably, the survey showed huge price increases of between 10 to 40 percent were recorded for mealie meal, rice, powdered milk, peanut butter, washing powder, lotions, cooking oil, beef and chicken. The price of a 10 kilogramme (kg) bag of Red Seal roller meal jumped 18,2 percent to US$6,31 in the first three months of the year from US$5,34 in the comparative period a year ago.
A 2kg bag of Gloria self-raising flour increased by 20,7 percent. Similarly, meat prices rose as well, with a kilogramme of blade beef soaring more than 20 percent. For rice, Mariana and Mahatma rice brands spiked 24 percent and 20 percent from US$2,35 to US$2,93 and from US$1,71 to US$2,05, respectively.
Sachets for both Sunlight and Omo washing powders "recorded huge price increases of around 30 percent between the two periods". But the price of other products declined. Campha Care (skin product), Jade (bathing soap) and Dendairy milk prices fell between 16 percent to 18 percent in the review period.
Overall, NCC observed that prices have been increasing since November 2016 - coincidentally the same month bond notes were rolled out in the market. This, market watchers say, might be a possible indication of arbitrage (taking advantage of different prices and sentiment) in the market.
The survey was based on monthly average of eight shops for selected products in Harare's central business district (CBD) and the Avenues. There is a general feeling that local businesses are struggling to get rid of the habit of conveniently exploiting the challenging economic business environment to profiteer.
Economists said it is hardly surprising that the same retailers that were arbitrarily raising prices during the hyperinflationary era are the same retailers that are currently guilty of the same offence. It is believed that the present trend tends to soften consumer demand and work against Government's broad objectives to promote local industry and economic growth.
Import restrictions have generally shielded local companies from the effect of competing products, especially from South Africa. Local consumers, therefore, have no option but to rely on local producers.
In a statement on Zimra's revenue performance for the three months ended March 2017, Zimra board chairperson Mrs Willia Bonyongwe urged Government to seriously look into the mark ups of those who get import licences to import goods.
The taxman believes extortionate pricing has the adverse effect of denting industry's capacity of increasing production and exports. "Profiteering is a local disease. For example, following the aborted introduction of Value Added Tax (VAT) through Statutory Instrument 20 of 2017 on selected basic commodities, the prices were never adjusted after it was repealed.
"The high margins are one of the major inflation drivers and currently, most of our goods and services dismally fail the import parity test owing to the huge profit margins," she said. Zimra urged the retailers to appreciate the value of the US dollar as a foreign reserve.The revenue collector highlighted that if the profiteering situation is left unchecked, all strategies to increase production and exports will not succeed and it would be a case of throwing good money after bad.
Mr Bonyongwe says, "There is an urgent need for the nation to look at local cost structures (labour, including executive packages, utilities, and the myriad of levies which exist currently)."Government must also seriously look into the mark ups of those who get licences to import goods."This is not a call for price control but, all these factors impact negatively on Zimbabwe's capacity to increase imports and exports."There is no justification for the current excessive mark ups on imported goods for fertilisers, chemicals and other inputs, equipment, even medicines."
Much of the price increases were effected after Government gazetted Statutory Instrument (SI) 20 of 2017, which put a 15 percent Value Added Tax (Vat) on beef, eggs, milk and margarine among other basic commodities. But 70 days after the planned tax was rescinded through SI 26A - which repealed SI 20 - businesses have not yet reviewed their prices.
While steering clear of advocating for price controls that have historically proved to be ruinous, NCC and Zimra indicated that Government might need to effectively cushion consumers from greedy businesses by enforcing the law. Many businesses have been caught out by a survey that was conducted by the NCC during the first quarter of the year.
However, the Commission says the current price increases are a result of many factors that are presently affecting businesses. "The Commission attributes the price increases to a number of factors such as 10 percent to 15 percent increment from producers to circumvent foreign payment delays, effects of 15 percent value added tax on certain commodities, bond note speculation, foreign currency shortages, increase in the price of some raw materials on global market, fuel price increases, among other factors," it said in a statement last week.
Notably, the survey showed huge price increases of between 10 to 40 percent were recorded for mealie meal, rice, powdered milk, peanut butter, washing powder, lotions, cooking oil, beef and chicken. The price of a 10 kilogramme (kg) bag of Red Seal roller meal jumped 18,2 percent to US$6,31 in the first three months of the year from US$5,34 in the comparative period a year ago.
A 2kg bag of Gloria self-raising flour increased by 20,7 percent. Similarly, meat prices rose as well, with a kilogramme of blade beef soaring more than 20 percent. For rice, Mariana and Mahatma rice brands spiked 24 percent and 20 percent from US$2,35 to US$2,93 and from US$1,71 to US$2,05, respectively.
Sachets for both Sunlight and Omo washing powders "recorded huge price increases of around 30 percent between the two periods". But the price of other products declined. Campha Care (skin product), Jade (bathing soap) and Dendairy milk prices fell between 16 percent to 18 percent in the review period.
Overall, NCC observed that prices have been increasing since November 2016 - coincidentally the same month bond notes were rolled out in the market. This, market watchers say, might be a possible indication of arbitrage (taking advantage of different prices and sentiment) in the market.
The survey was based on monthly average of eight shops for selected products in Harare's central business district (CBD) and the Avenues. There is a general feeling that local businesses are struggling to get rid of the habit of conveniently exploiting the challenging economic business environment to profiteer.
Economists said it is hardly surprising that the same retailers that were arbitrarily raising prices during the hyperinflationary era are the same retailers that are currently guilty of the same offence. It is believed that the present trend tends to soften consumer demand and work against Government's broad objectives to promote local industry and economic growth.
Import restrictions have generally shielded local companies from the effect of competing products, especially from South Africa. Local consumers, therefore, have no option but to rely on local producers.
In a statement on Zimra's revenue performance for the three months ended March 2017, Zimra board chairperson Mrs Willia Bonyongwe urged Government to seriously look into the mark ups of those who get import licences to import goods.
The taxman believes extortionate pricing has the adverse effect of denting industry's capacity of increasing production and exports. "Profiteering is a local disease. For example, following the aborted introduction of Value Added Tax (VAT) through Statutory Instrument 20 of 2017 on selected basic commodities, the prices were never adjusted after it was repealed.
"The high margins are one of the major inflation drivers and currently, most of our goods and services dismally fail the import parity test owing to the huge profit margins," she said. Zimra urged the retailers to appreciate the value of the US dollar as a foreign reserve.The revenue collector highlighted that if the profiteering situation is left unchecked, all strategies to increase production and exports will not succeed and it would be a case of throwing good money after bad.
Mr Bonyongwe says, "There is an urgent need for the nation to look at local cost structures (labour, including executive packages, utilities, and the myriad of levies which exist currently)."Government must also seriously look into the mark ups of those who get licences to import goods."This is not a call for price control but, all these factors impact negatively on Zimbabwe's capacity to increase imports and exports."There is no justification for the current excessive mark ups on imported goods for fertilisers, chemicals and other inputs, equipment, even medicines."
Source - zimpapers
