By Fidelity Mhlanga
Zimbabwe is nearing the much dreaded economic horrors of 2008 punctuated by hyperinflation, widespread shortages of foreign currency and fuel coupled with a spike in prices of everything, including staple food.
The rise in prices of basic commodities and services first became evident in September 2018 when government put in place a raft of monetary measures that included the separation of accounts and the introduction of a punitive 2% tax regime.
In February government removed the long-rejected 1.1 fictitious rate between the USD and RTGS currency and put in place a formal albeit still unrealistic interbank market, where the USD can trade with the RTGS, but still failed to fend off the parallel market’s brutal reality where the premium between the USD and local currency widens daily.
What has made the problem more complex and volatile is the fact that while prices continue to skyrocket, salaries have remained stagnant or moved insignificantly in the case of the public service. This has eroded the people’s buying power along with the standard of living by widening levels.
Government’s recent attempts at pleasing the workers by increasing salaries by just over RTGS$100 were trashed by the ever-rising prices including the massive hike in the bread price last week.
Products were last week being priced according to the parallel market exchange of RTGS$5: US$1 seen as the true rate, while salaries based off government’s official annual inflation rate of 66,8%.
Bread, which rose from RTGS$0,90 at the time President Emmerson Mnangagwa seized power end of 2017 to RTGS$3,50 last week, seems to be inching closer to its US$0,90 value which at today’s parallel market rate would be nearly RTGS$5.
Inevitably, other commodity prices have taken the same trajectory leaving the consumers facing an unaffordable shopping basket.
For instance, sugar has gone up sharply to RTGS$5,20 from $1,80 for a 2kg pocket while a 2kg pocket of flour now sells for RTGS$7 from about $3. A 10kg packet of mealie meal, 1 litre of fresh milk, 2kg flour, 2kg packed chicken have also shot up to RTGS$13, RTGS$3,40, RTGS$7, and RTGS$17, respectively.
Zimbabwe Congress of Trade Unions president Peter Mutasa said the working population, both formal and informal, was the hardest hit while farmers and even students had borne the brunt of the spiralling economy.
“The impact of the economic crisis has hit hard on these groups. There is no one listening to our alternative voice. We need to address the toxic political environment. We must deal with corruption, cronyism, nepotism, and the capture of the state which is the biggest issue. We are not poor in terms of resources, but we are poor in terms of stewardship,” said Mutasa.
“We need to deal with cartels that have captured the state. We need genuine dialogue. We need to adhere to the Kadoma Declaration that deals with the rule of law and independence of institutions. There is no country that will prosper through brutalising its citizens like what we witnessed in January this year without addressing the economic challenges the country is experiencing. Those in power need to address problems. Citizens won’t continue to be cowed into submission.”
National Consumer Rights Association advocacy and campaign advisor Effie Ncube said prices hikes over the past several months had effectively wiped out savings of senior citizens and the salaries of employed consumers
“We are deeply disturbed and angered by the recent wave of devastating price hikes of basic commodities like bread.
We therefore call upon government and business to bear in mind that over 90% of consumers are unemployed and less than 10% who are employed have had no salary raises in years. In fact, the unrestrained hikes in prices over the past several months have effectively wiped out savings of senior citizens and the salaries of employed consumers,” he said.
“There is an urgent and pressing need to arrest the situation before it triggers social and political instability as ultimately the buck stops with government. The state of the economy is terrible and it is government that is responsible for managing the affairs of the country and shaping underlying economic fundamentals that inform productivity and pricing.”
Both Mutasa and Ncube may be on to something as explained by American and British-headquartered financial services firm Fitch Solutions in their April 2019 Southern African report.
“At Fitch Solutions we expect political risk to remain elevated, with the possibility of further substantial protests,” the Fitch report on Zimbabwe reads.
“Mnangagwa faces growing threats to his authority, with little room for manoeuvre in the current environment of rising social unrest and narrowing macroeconomic buffers. The government’s hard-line response to protests and strikes risks entrenching opposition, but any move to reverse fuel price hikes or acquiesce to demands for substantial pay increases or increased use of US dollars would likely be perceived as weakness by protesters and, potentially, the president’s military backers.”
Fitch Solution continued to state that while Mnangagwa would remain in office, the risk of some form of regime change had “increased substantially in recent weeks”.
Using the old method of calculating annual inflation, the current 66,8% translated to 166%, putting Zimbabwe in hyperinflationary mode.
This has been driven by price hikes as business endeavoured to benchmark their prices to the USD parallel market rate after government introduced the RTGS dollar in February through Statutory Instrument 33 of 2019.
Telecommunication companies have also hiked their tariffs and schools have communicated that they would be increasing school fees next term, worsening matters for the public.
Exacerbating matters further, government removed grain subsidies on April 9 which although meant to save money, saw increased prices for major food and cash crops. In that regard, a tonne of maize is now pegged at RTGS$726 and wheat RTGS$1 089,69 from $390 and $500 respectively.
The livestock industry says under the circumstances of unaffordable stock feed, shortages of pork, chicken and beef were imminent.
At a recent meeting held by the Confederation of Zimbabwe Industries, the Livestock and Meat Advisory Council (LMAC) cautioned that the viability of the industry was under threat because the cost of livestock feed had become unsustainable.
Confederation of Zimbabwe Industries president Sifelani Jabangwe said prices were following policy pronouncements by government
“Unfortunately, the prices are going up due to the cost pressures that are affecting producers. For example, when new producer prices of wheat were announced, prices of wheat immediately went up for bread makers. Prices have been responding to government policy announcements; for instance, the increase of fuel and the 2% tax. Another dynamic is the exchange rate which has been going up.
“We are not sure why it’s trekking upwards, yet normally we get stability in foreign exchange during the tobacco selling season,” Jabangwe said.
Economist John Robertson blamed government’s unbridled expenditure which has seen the accumulation of virtual money against real money.
“We see this as inevitable as we have seen a collapse of discipline in government through printing money and the issuance of treasury bills. We now have billions of RTGS balances not backed by real money or production. We have virtual money and it’s the cause of inflation,” he said.
“We need investors to come and increase production efficiency, but they don’t have confidence in government due to the high cost of doing business through licences, fees and kickbacks.”
Ncube said as an organisation, they condemned the culture of rampant profiteering and speculative pricing that some businesses were engaged in.
“This behaviour is one of the causes of the hikes,” Ncube said.
“The hikes will deeply undermine the food and nutritional security of households, most likely leading to a rise in food deficiency diseases. Especially and particularly affected will be child-headed families, orphans and vulnerable children, senior citizens and those who require adequate and balanced nutrition in order to take medicines for chronic illnesses like TB and HIV/Aids.”
Whether government likes to admit it or not, poverty levels are now on the rise.
The United Nations last month estimated that a total of 5,3 million Zimbabweans would need food aid with over 1,5 million of them being in the urban areas.
Driving the hunger further is the 2018/19 drought that government was grossly unprepared for, which has severely affected all of Zimbabwe’s cash and food crops.