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'Price controls risk further shortages'

by Staff reporter
27 Sep 2017 at 16:04hrs | Views
Economists warned of worse shortages of basic commodities and an expanding parallel currency market as the Zimbabwean government mulls plans for new price controls across all sectors of production, to take effect within the next weeks.

President Robert Mugabe has hinted at the introduction of a new price control structure, which includes fuel, to curb what he termed "price increase madness" by producers, wholesalers and retailers.

Addressing thousands of Zanu-PF supporters soon after landing at Harare International Airport from the United Nations General Assembly, Mugabe said his government would deal with the issue in just two days.

"How can we have shortages of cooking oil and massive price hikes, all this happening while I was away? These are saboteurs, who want to cause panic against the government, so that people can riot against us, but our people are clever. They will not be swayed in that way. This is not an issue you should worry yourselves over. We will deal with it in just two days," he said.

Mugabe 's speech coincided with a statement purported to be from the National Competitiveness Commission (NCC), chaired by renowned business leader Kumbirai Katsande, warning of a crackdown on prices.

The statement said: "Please be advised that the NCC Board has dispatched a taskforce to assess and inquire on pricing nationwide.

"Numbers of the officers are expected to increase as the week goes by as part of government 's efforts to cover every part of the country.

"Retailers who may be found wanting will have their licences terminated with immediate effect."

But Katsande said: "It did not originate from us. In fact, we are just settling in and putting things in place. We have not even started work yet."

Economists told the Daily News the mooted price control regime would precipitate a shortage of basic commodities on a larger scale than experienced before, because only a few producers are able to supply the market at controlled prices and the majority may stop production.

Economist Kingston Khanyile said: "We are entering into the inglorious sphere of hyperinflation. It is a world of economic chaos, wrenching poverty and financial commotion.

"In this situation, you cannot rule out the possibility of price controls."

Economic analyst, Elliot Lumbe said the situation is likely to worsen as the country trudges towards next year 's general elections.

"It is unfortunate that some people are causing alarm and despondency ahead of elections by causing economic chaos. People should put heads together and bury their differences for the purpose of economic development instead of engaging in needless fights," he said.

Commodity prices in Zimbabwe shot up in the past week as manufacturers, wholesalers and retailers took advantage of a lull in the monitoring of price controls, blamed on a shortage of cash, to raise their prices to what they said were viable levels.

Leading financial research firm Equity Axis said the country 's monetary system went into a "shock" in the week as the informal market exchange rates for the RTGS and bond note relative to the US dollar drastically plummeted, a syndrome of the debilitating economic environment.

Sentiments in the economy are that the economic situation will worsen and economic participants are positioning themselves through accumulation of assets and real money US dollars at minimum losses in a manner exhibited on the Zimbabwe Stock Exchange (ZSE) over the past few months.

"An overrun budget, constant government overdraft demands, possible election funding demands and a doubling up of the bond notes circulating in the market are factors that have unnerved economic participants and formed expectations of a worsening economy," Equity Axis said in a commentary issued yesterday.

"Rent seekers have likewise taken advantage of the expectations, mopping the hard currency in the market for resell at superior rates."

The country has also been convulsed by critical fuel shortages, with most filling stations rejecting EcoCash and swipe cards and demanding cash.

This has left many motorists stranded as they cannot access the cash demanded by fuel retailers, with long queues of anxious motorists at fuel stations.

Efforts to get comment from Industry and Commerce minister, Mike Bhimha were fruitless as his mobile phone was not being answered.

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Source - dailynews