Friday, October 25, 2013

COMESA Plans to Foster Rationale Pricing

Plans afoot to foster rational pricing

October 25, 2013
Business Reporters
Zimbabwe Herald

GOVERNMENT is considering measures to ensure a rational pricing system in the wake of serious concerns over high prices of goods and services, Vice President Joice Mujuru has said.

Speaking at a ZimTrade exporters’ conference in Harare yesterday, VP Mujuru said Cabinet was concerned with high prices and consensus was that the scenario needed urgent attention.

This follows the realisation that prices in Zimbabwe were higher than those in the region, especially South Africa.

A litre of milk in South Africa costs R10, which is roughly equivalent to US$1, while here it costs US$1,55.

A kilogramme of potatoes costs R11, which is equivalent to US$1,10, while in Zimbabwe it goes for US$1,75.

A loaf of bread in Zimbabwe sells for US$1, while in South Africa it costs R8, which is equivalent to 80 US cents.

A 2kg pack of rice costs R11,50 in South Africa, which is almost US$1,50, while locally its sells for US$2,20.

“Our pricing system in this country is something that needs to be urgently looked into and we have since discussed this in Cabinet that we need to definitely take it upon ourselves as urgently as possible . . . that we work on the pricing structure in this country.

“Our thinking capacity is still hovering in the Zimbabwe dollar era where people would ‘burn’ Zimbabwean dollars to get US dollars and l believe that (mentality) must stop now as we are now dealing with hard currency.”

Zimbabweans are enduring punitive prices even as the South African Rand has been falling, a development that ordinarily should make importing from South Africa cheaper.

The country imports about 60 percent of the goods it consumes from South Africa due to either industry’s incapacity to meet demand or complete unavailability of the products locally.

Considering Zimbabwe uses a basket of currencies dominated by the greenback, imports from South Africa should be cheaper as the rand has depreciated against the dollar.

It means one requires less of the greenback to import goods priced in the rand.

Retailers have generally been quoting prices on the extreme end since dollarisation, reflecting unbridled profiteering similar to what transpired in the hyper-inflationary era.

While prices of most goods and services reflect the high cost component arising from the cost of importing or manufacturing, some retailers are fleecing overburdened consumers surviving on low disposable incomes.

VP Mujuru said companies needed to invest in relevant technologies to improve productivity and quality of goods and services, while taking full advantage of export opportunities both in the region and beyond.

She called for urgent interventions aimed at addressing the negative trade balance between the country and its trading partners and to improve activity of manufacturers.

VP Mujuru said Government would also intensify efforts to build export capacity while improving the terms of trade.

“The persistent trade deficit calls for urgent action to improve the trade balance through robust export performance and this can only be achieved through competitive exports,” said VP Mujuru.

“The only sustainable source of export earnings is through the export of our value-added, competitive goods and services to the rest of the world.”

Most locally produced goods tend to be generally expensive due to the high cost of manufacturing, resulting from a number of factors ranging from high cost of labour, utilities, expensive funding, tight liquidity, shortage of raw materials.

The same factors also mean that after taking into account the cost of transport and import duties, the price of goods and services sold on the local market remain on the higher end.

As a result of the high cost of production, worsened by old and inefficient equipment, locally produced products and services cannot compete with imported goods.

No comments: