Consumer watchdog slams business

THE Consumer Council of Zimbabwe (CCZ) says businesses have effected "unjustified" price hikes in the past few months despite accessing foreign currency on the Reserve Bank of Zimbabwe (RBZ)'s foreign currency auction system.

Zimbabwe has been battling serious foreign currency shortages since 2019, and firms have struggled to import raw materials and equipment.

The foreign currency auction system was introduced in June last year as a price discovery mechanism.

It had, by July 2021, raised over US$1,7 billion for companies at an average rate of about US$1:$85, compared to rates of up to US$1:$120 that were obtaining on the black market during the first half of this year.

Parallel market rates have since rocketed to about US$1:$160 in the past month, after the auction system was hit by critical foreign currency shortages.

In an interview with NewsDay Business yesterday, CCZ acting director, Rosemary Mpofu said producers across formal markets were benefiting from the cheap RBZ foreign currency.

She said there was no reason for them to hike prices.

"We are concerned about the increase in prices because there is no justification whatsoever," Mpofu told NewsDay Business. "We are aware that manufacturers, millers and many other key stakeholders in the food value chain are accessing foreign currency at the auction rate at RBZ and there is no justification why we should continue to see price hikes, particularly, for food."

"At the moment, we keep seeing an increase every month. We want to understand why. It is like our retailers, our manufacturers, our wholesalers are so used to just increasing prices, even when there is no reason.

"They think it is one of their functions. They think that if they don't increase prices in any given month, they will have done wrong to their business.

"They think it's one of the requirements to increase prices even when there is no justification. So, we are complaining as consumers to say we want that justification and we are tracking them," she said.

Price hikes reached tipping point in May, after authorities published Statutory Instrument 127 of 2021, which prescribed stiffer penalties for businesses which abuse foreign currency in Zimbabwe.

Scores of firms have since been slapped with fines after dabbling in illegal foreign currency markets.

Economists estimated at the time that basic commodity prices rocketed by a staggering 40%, one of the highest such rates in United State dollar terms recently.

As a result, inflationary pressures have remained in Zimbabwe, although the rate has tumbled to double digit figures lately, after spending most of the first half in triple digit figures.

"There is no justification whatsoever for them to be increasing prices at this point in time because there is a lot of foreign currency in this country," Mpofu said.

"We are told many times that forex is available and even now, people are able to access forex.

"The ordinary person, you and I, are able to access foreign currency through bureaux de change so why should we continue to see price increases?"

Another challenge being faced by firms was the slow turnaround time in accessing foreign currency after a forex auction where some companies have to wait for four weeks.

While RBZ governor John Mangudya has promised to address this through Letters of Credit, companies are still facing challenges.