Govt descends on price manipulators

THE Consumer Protection Commission (CPC) will soon impose heavy fines on retailers that have not reduced prices of their goods in line with movements of the exchange rate on the interbank market.

Prices of basic goods rose sharply last month after the Zimbabwe dollar suffered heavy losses on the official exchange market. But despite the local unit making substantial gains on both the official and black markets over the last three weeks, most retailers have maintained the same prices, a practice officials believe is a form of price manipulation.

Some market players are engaging in forward pricing, which involves quoting prices using projected future exchange rates. This ends up prejudicing the consumer.

The local currency regained its value from June 27 at the wholesale foreign currency auction to settle at US$1:$5 251 last week, from US$1:$6 326 three weeks ago.

Last week, the CPC undertook a market surveillance to establish the "base price" of a basket of key basic commodities in selected retail shops.

A base price is the initial price of any product before the addition of other charges such as taxes or a retailer's markup.

The consumer watchdog will this week begin monitoring the movement of base prices against movements of the exchange rate, with retailers that fail to adjust prices accordingly facing censure.

In an interview, CPC chairman Dr Mthokozisi Nkosi said there was suspicion that some businesses were engaging in unethical practices.

"For the past week, we have been carrying out a survey in four major retail outlets in the country to find a base price of basic commodities that we will use as the basis for monitoring the movement of prices in relation to official exchange rate movements," he said.

"So, next week (this week), we will be moving around and monitoring whether the retail outlets are aligning their prices with the movement of the official exchange rate now that we have the base prices for most of the basic commodities."

Dr Nkosi said businesses found to be engaging in forward pricing will face sanctions.

"Anyone found maintaining or raising prices arbitrarily will be called in for questioning," he continued.

"When we feel that their explanation is unconvincing, we then levy fines because what they will be doing is tantamount to sabotaging the economy.

"We have realised that retailers have a tendency of increasing prices hastily when the Zimbabwe dollar sheds value, but are very slow to react when the local currency starts to gain against the hard currency.

"This is exactly what they are doing — refusing to review their prices downwards."

Last week, parastatals Zimbabwe National Roads Authority and the Zimbabwe Energy Regulatory Authority announced the reduction of road toll fees and fuel prices, respectively.

Bakers Inn also reduced the price of its bread in response to the appreciation of the local currency.

Confederation of Zimbabwe Retailers (CZR) president Mr Denford Mutashu said retailers must adjust prices downwards in response to movements of the exchange rate.

"Any player that chooses to increase prices, either in United States dollars or the local currency, given what is happening on the exchange market, is pushing himself out of business," said Mr Mutashu.

"We are working closely with stakeholders along the value chain, including the manufacturers and retailers, and advising them on the need to follow market developments regarding the stability of the exchange rate."

Economist Mr Prosper Chitambara said some businesses are profiteering.

"In economics, we talk about prices being sticky downwards.

"One factor is that businesses want to maximise their short-term profits, so normally it's difficult for prices to adjust downwards despite changes in the exchange rate," he said.