Producers raise prices of basic goods

Prices of basic commodities have increased sharply since Zimbabwe's 31 March legislative elections, causing panic buying and fears of a return to widespread shortages.

Economist Dennis Nikisi told IRIN on Monday that the country's foreign currency shortages were to blame for the current situation, because "84 percent of inputs in the productive sector are sourced through foreign currency".

Prices of basic goods were capped prior to the legislative elections, with industry agreeing not to increase prices as "that might create discontent, especially among the urban electorate", Nikisi explained.

However, prices of basic commodities began to increase immediately after the 31 March poll, while the availability of goods contracted.

In its latest situation report the World Food Programme (WFP) noted that "steep price increases in all basic commodities, and a severe shortage of fuel and maize meal products [have been] reported", and that "the price of some commodities has increased by over 100 percent, while the Grain Marketing Board (GMB) [the state monopoly buyer] is reported to be holding urgent consultations over the shortage of maize products".

When available, the price of maize per kilogram ranges from the equivalent of US 27-38 cents, which is "well above the casual daily wage equivalent of $0.25".

Consumer Council of Zimbabwe director Ms R Siyachitema told IRIN: "We know that prices have gone up on a certain number of commodities and the result ... is that people start panicking. What we are saying is that they should not panic ... there are discussions being held at the moment between the Ministry of Industry and International Trade, and producers."

The discussions were aimed at addressing rising commodities prices.

"Manufacturers are saying, 'if we hold prices at pre-31 March levels we are not going to survive' ... so there's no cooking oil, sugar, salt and commonly needed drugs on the shelves. Unless something fundamental is done, we are back to where we were again around 2000. The major concern is about foreign currency ... if between 90 to 95 percent of all bids for foreign currency [at Reserve Bank auctions] are being rejected, then what does the productive sector do?" asked Nikisi.

In order to maintain tighter control over foreign currency, the Reserve Bank of Zimbabwe has adopted a foreign currency auction system. It involves the bi-weekly auctioning of foreign currency to the foreign exchange market through the Reserve Bank.

"The explanation from some quarters is that some companies are playing politics, but mealie [maize] meal and fuel are controlled by state institutions - how then can you say that they are playing party politics?" Nikisi remarked. "The situation is bad. To me, the problem is purely economic."

Zimbabwe's inflation rate fell to just under 130 percent in February from a peak of 620 percent in January 2004.