News / National
Zimbabwe black market running amok
17 Apr 2019 at 07:25hrs | Views
GOVERNMENT is facing renewed pressure on the economic front, with the parallel foreign currency market once again running amok — pushing the prices of basic consumer goods like bread beyond the reach of many Zimbabweans, the Daily News reported.
This comes as many leading schools around the country have also sharply hiked their fees, further piling on the stress on already hard-pressed parents — especially those earning their salaries in RTGS dollars, which have been seriously eroded by inflation which officially stands at a staggering 66,8 percent.
Yesterday, the coveted United States dollar breezed past the 5,20 mark to the RTGS$ on the back of what both business and political analysts say is a result of policy inconsistencies by authorities — following last week's surprising announcement by Finance minister Mthuli Ncube that the country would have a new currency within a year.
"I predict that by the end of June this year, it (the black market rate) will be 1:10 ... in other words people are becoming poorer and poorer. "Bad economic mismanagement is theft on people's savings and this has been created by Mthuli Ncube ... he lives in a reality-distorted world," former Finance minister during the short-lived government of national unity (GNU), Tendai Biti, told the Daily News yesterday.
"The reason why we are having high inflation is that we are not producing, and because we are not producing, we are not earning foreign currency in the form of export earnings. "So, we are eating that which other countries are producing. Our import bill is high, and our imports are paid in US dollars.
"So, the US dollar has become a commodity … we have this disaster that it shoots up on the black market and when it shoots up the prices of everything go up while the value of wages goes down," Biti added.
He also warned that government could soon be forced to increase the price of fuel again, to avoid even worse shortages.
"In the past 10 days, I have been in Matabeleland South, North and Bulawayo and there is no fuel anywhere. "I am moving with jerry cans in my car as if we are in 1930 southern Rhodesia ... all thanks to Mthuli Ncube," Biti railed.
In February, the Reserve Bank of Zimbabwe (RBZ) introduced the RTGS dollar when it unveiled its Monetary Policy Statement which sought to breathe new life into the economy. However, the RTGS dollar — which opened trading at 2,5 against the US dollar — has since lost its value sharply, with the interbank market battling to attract money.
Following Ncube's announcement, the forex parallel markets shot to nearly RTGS$5 to the greenback from 4,30 amid indications that the situation would get worse. Worried business leaders told the Daily News yesterday that things "were edging towards a concerning zone", requiring the government to take remedial action without "further delays".
Confederation of Zimbabwe Retailers (CZR) president, Denford Mutashu, said consumers were now "under siege" because of falling production levels and the rampant foreign currency black market.
"The wave of price increases is worrisome and happening at a time that disposable incomes have been eroded.
"The foreign currency parallel market has been running amok. Bread and maize-meal went up due to movement on new producer prices for grain and wheat that pushed up input costs for millers and bakers.
"If one factors in the speculative nature of our pricing, it only means the consumer is seriously exposed," the forthright Mutashu warned.
On his part, Confederation of Zimbabwe Industries (CZI) president, Sifelani Jabangwe, blamed the foreign currency black market for driving the prices of basic goods beyond the reach of many consumers. "The sellers are not releasing money at the low price quoted on the official market. So, businesses are still unable to access that.
"We have seen an influx of buyers, but the sellers are not forthcoming. What we need is the interbank to operationalise.
"Companies are still struggling because hard currency is not readily available, and so the production side is constrained," he said.
Yesterday, bakers increased the price of bread from RTGS$1,80 to RTGS$3,50 — citing the rising costs of production and the volatile operating environment.
This came hardly a day after millers had increased the price of maize-meal in response to last week's hike by the government of grain producer prices. Now, some private schools are also announcing sharp hikes in their fees, in response to the worsening economic situation in the country.
Among the private schools, which have advised parents of new school fees are Arundel School in Harare and Petra College in Bulawayo. Parents with children at Arundel, who are day scholars, will now be required to pay RTGS6 600 or US$1 500 — whilst weekly borders will be paying RTGS$8 900 or US$2 023.
Full borders on the other hand will have to stump up RTGS$10 800 or US$2 455.
At Petra College, the fees for ECD have escalated from RTGS$991 to RTGS1 050. Grades 1 to 7 will now be paying RTGS$1 620 from RTGS$1 390 — with Cambridge levy now costing US$710.
Forms 1 to 6 fees have also gone up from RTGS$1 965 to RTGS$2 400, and US$1 040 for Cambridge levy.
Meanwhile, political analysts have warned the government that it was killing confidence through policy inconsistencies. "I think what we are seeing is the collapse of the economy in a number of ways. First, the foreign currency crisis has persisted, necessitating that industry has to pay a premium at the black market in order to access foreign currency for inputs that are needed for production.
"The second thing is that the economy is not growing … we are not seeing new industries … so incomes for citizens have remained stagnant. "Then thirdly, there is the speculative aspect in which prices are pegged at the black market rate, and where people tend to take advantage of the situation.
"Fourthly, there are inconsistencies in terms of policy. We hear one thing on the currency from the RBZ. We hear another from the minister of Finance Mthuli Ncube," political analyst Rashweat Mukundu told the Daily News.
"There was the talk of the Transitional Stabilisation Plan, but we are not sure where it is right now, especially with reports that the government has gone back to its usual behaviour of overspending and crowding out productive sectors.
"Essentially, we are in a stagnant situation where prices are shooting up, incomes have remained stagnant, civil servants received an average of $60 to $70 as an increment ... meaning at the end of the day, the increment may come down to $30, which is going to be washed away by the increases in consumer goods, transport and fuel costs.
"Zimbabwe is in a deep crisis and one can really wonder if we will get to the end of the year under this situation," Mukundu added.
This comes as many leading schools around the country have also sharply hiked their fees, further piling on the stress on already hard-pressed parents — especially those earning their salaries in RTGS dollars, which have been seriously eroded by inflation which officially stands at a staggering 66,8 percent.
Yesterday, the coveted United States dollar breezed past the 5,20 mark to the RTGS$ on the back of what both business and political analysts say is a result of policy inconsistencies by authorities — following last week's surprising announcement by Finance minister Mthuli Ncube that the country would have a new currency within a year.
"I predict that by the end of June this year, it (the black market rate) will be 1:10 ... in other words people are becoming poorer and poorer. "Bad economic mismanagement is theft on people's savings and this has been created by Mthuli Ncube ... he lives in a reality-distorted world," former Finance minister during the short-lived government of national unity (GNU), Tendai Biti, told the Daily News yesterday.
"The reason why we are having high inflation is that we are not producing, and because we are not producing, we are not earning foreign currency in the form of export earnings. "So, we are eating that which other countries are producing. Our import bill is high, and our imports are paid in US dollars.
"So, the US dollar has become a commodity … we have this disaster that it shoots up on the black market and when it shoots up the prices of everything go up while the value of wages goes down," Biti added.
He also warned that government could soon be forced to increase the price of fuel again, to avoid even worse shortages.
"In the past 10 days, I have been in Matabeleland South, North and Bulawayo and there is no fuel anywhere. "I am moving with jerry cans in my car as if we are in 1930 southern Rhodesia ... all thanks to Mthuli Ncube," Biti railed.
In February, the Reserve Bank of Zimbabwe (RBZ) introduced the RTGS dollar when it unveiled its Monetary Policy Statement which sought to breathe new life into the economy. However, the RTGS dollar — which opened trading at 2,5 against the US dollar — has since lost its value sharply, with the interbank market battling to attract money.
Following Ncube's announcement, the forex parallel markets shot to nearly RTGS$5 to the greenback from 4,30 amid indications that the situation would get worse. Worried business leaders told the Daily News yesterday that things "were edging towards a concerning zone", requiring the government to take remedial action without "further delays".
Confederation of Zimbabwe Retailers (CZR) president, Denford Mutashu, said consumers were now "under siege" because of falling production levels and the rampant foreign currency black market.
"The wave of price increases is worrisome and happening at a time that disposable incomes have been eroded.
"The foreign currency parallel market has been running amok. Bread and maize-meal went up due to movement on new producer prices for grain and wheat that pushed up input costs for millers and bakers.
"If one factors in the speculative nature of our pricing, it only means the consumer is seriously exposed," the forthright Mutashu warned.
On his part, Confederation of Zimbabwe Industries (CZI) president, Sifelani Jabangwe, blamed the foreign currency black market for driving the prices of basic goods beyond the reach of many consumers. "The sellers are not releasing money at the low price quoted on the official market. So, businesses are still unable to access that.
"We have seen an influx of buyers, but the sellers are not forthcoming. What we need is the interbank to operationalise.
"Companies are still struggling because hard currency is not readily available, and so the production side is constrained," he said.
Yesterday, bakers increased the price of bread from RTGS$1,80 to RTGS$3,50 — citing the rising costs of production and the volatile operating environment.
This came hardly a day after millers had increased the price of maize-meal in response to last week's hike by the government of grain producer prices. Now, some private schools are also announcing sharp hikes in their fees, in response to the worsening economic situation in the country.
Among the private schools, which have advised parents of new school fees are Arundel School in Harare and Petra College in Bulawayo. Parents with children at Arundel, who are day scholars, will now be required to pay RTGS6 600 or US$1 500 — whilst weekly borders will be paying RTGS$8 900 or US$2 023.
Full borders on the other hand will have to stump up RTGS$10 800 or US$2 455.
At Petra College, the fees for ECD have escalated from RTGS$991 to RTGS1 050. Grades 1 to 7 will now be paying RTGS$1 620 from RTGS$1 390 — with Cambridge levy now costing US$710.
Forms 1 to 6 fees have also gone up from RTGS$1 965 to RTGS$2 400, and US$1 040 for Cambridge levy.
Meanwhile, political analysts have warned the government that it was killing confidence through policy inconsistencies. "I think what we are seeing is the collapse of the economy in a number of ways. First, the foreign currency crisis has persisted, necessitating that industry has to pay a premium at the black market in order to access foreign currency for inputs that are needed for production.
"The second thing is that the economy is not growing … we are not seeing new industries … so incomes for citizens have remained stagnant. "Then thirdly, there is the speculative aspect in which prices are pegged at the black market rate, and where people tend to take advantage of the situation.
"Fourthly, there are inconsistencies in terms of policy. We hear one thing on the currency from the RBZ. We hear another from the minister of Finance Mthuli Ncube," political analyst Rashweat Mukundu told the Daily News.
"There was the talk of the Transitional Stabilisation Plan, but we are not sure where it is right now, especially with reports that the government has gone back to its usual behaviour of overspending and crowding out productive sectors.
"Essentially, we are in a stagnant situation where prices are shooting up, incomes have remained stagnant, civil servants received an average of $60 to $70 as an increment ... meaning at the end of the day, the increment may come down to $30, which is going to be washed away by the increases in consumer goods, transport and fuel costs.
"Zimbabwe is in a deep crisis and one can really wonder if we will get to the end of the year under this situation," Mukundu added.
Source - dailynews
