Prices of basic consumer goods have gone up sharply over the past few weeks, on the back of worsening foreign currency shortages in the country.
At the same time, experts warn that the price increases are set to continue beyond the July 30 national elections – as the insatiable demand for the coveted United States dollar keeps growing as both speculators and businesses increasingly rely on the thriving black market for their forex needs.
This has seen the cash exchange rate of 100 US dollars rising to 142 bond notes on the parallel market – from about 130 a month ago – while the electronic transfer rate on platforms such as Zipit, RTGS and mobile money transfers has soared to a whopping 170 bond notes over the same period.
In addition to the soaring foreign currency exchange rates on the black market, the prices of fuel have also gone up – further pushing up production costs for the local manufacturing sector.
Confederation of Zimbabwe Retailers president Denford Mutashu confirmed to the Daily News on Sunday yesterday that prices had gone up significantly in recent weeks, and were set to continue rising.
“The global fuel price pressures, coupled with the dire foreign currency situation in the country, have had the negative effect of pushing the prices of both locally manufactured and imported goods up.
“Manufacturers are finding it increasingly difficult to source forex to procure raw materials from outside. The exchange rates have escalated on the parallel market and this has pushed prices of basics on a northward trajectory,” he said.
Confederation of Zimbabwe Industries (CZI) president Sifelani Jabangwe also said the local manufacturing industry was reeling from the critical shortage of foreign currency.
“Businesses are having great difficulties accessing foreign currency. This has been mainly due to the fact that our requirements have grown, in addition to the backlog which we still had.
“Supply has not matched this demand and in order to re-stock or buy raw materials, we have had to turn to the parallel market where the premium is ridiculously high now.
“Our economy is not generating enough foreign currency and this is why we are encouraging companies to export more and not just consume the foreign currency they generate,” Jabangwe said.
However, Reserve Bank of Zimbabwe governor John Mangudya said the foreign currency shortages were a result of the expanding economy which was not matched by the pace of local production which was critical for producing goods for export.
Former Finance minister Tendai Biti, who was credited with steering the economy from its black hole after the formation of the inclusive government in 2009, also told the Daily News on Sunday that the situation was likely to get worse before it got better.
“As I always say, you can rig an election but you can’t rig an economy. The massive dislocation in the economy is reflected in an exorbitant parallel exchange rate of over 70 percent, as well as the runaway inflation – reflecting that the economy does not have confidence in the current leadership who have no idea of how to turn around an economy which has collapsed,” he said.
According to figures from the Consumer Council of Zimbabwe (CCZ), the monthly food basket for a family of six jumped from $125,37 to $141,63 as at the end of May this year.
Among the basic goods whose prices continue to increase are poultry products, roller meal, detergents and brown sugar.
A survey by the Daily News on Sunday yesterday revealed that a crate of 30 eggs was being sold at an average price of $7,50 or 25 cents per egg at one retail chain. Economy beef was averaging $7 a kg, up from $5 which was the going price two months ago.
A tablet of lower end users’ soap, which retailed at 95 cents at the beginning of May, was being sold for $1,20 – while goods considered luxury items, such as Nivea shower gels and lotions, were now priced at between $8 and $10 respectively.
“I have seen informal figures that indicated that inflation in domestically produced goods is running at 25 percent, and imported goods at about 100 percent.
“I think the main thing that is driving prices is the increase in the informal rates for the dollar … and that is increasing the cost of importing raw materials,” economist and politician, Eddie Cross, said.
University of Zimbabwe economics professor Tony Hawkins also told our sister publication the Daily News last week that the worsening foreign currency shortages were at the heart of the unfolding crisis.
“Most of the goods manufactured in Zimbabwe have an imported content … If you look at the money supply on the parallel market, it gives you a better picture of what we are going through.
“The IMF also forecast inflation to be around 30 percent this year and all I can say is that it may be the highest we have seen since 2008,” he said.
Zimbabwe has not had its own currency since February 2009 when it adopted the multiple currency system, in which the US dollar has become the main trading currency.
President Emmerson Mnangagwa hinted about the return of the Zimbabwe dollar when he addressed the ill-fated Zanu-PF rally at White City Stadium in Bulawayo last weekend.
“Our Zimbabwe dollar collapsed in 2008 and 2009. We then adopted a basket of currencies – the South African rand, the United States dollar, the British pound, the Euro and so on.
“Initially, the US dollar and the rand accounted for 40 percent each, and the other 20 percent was the balance of other currencies. As time went on, the US dollar became dominant.
“The US dollar today takes about 90 percent of our transactional activity in the economy and we have no control over the US dollar.
“It is time that we must adopt our way of restoring the dignity of our country by creating our own currency,” Mnangagwa said.
This year’s elections have generated a lot of interest among both ordinary Zimbabweans and ambitious politicians alike, with the Zanu-PF strongman facing the youthful MDC Alliance candidate Nelson Chamisa and 21 other presidential aspirants in the July 30 plebiscite.
Many people are anticipating a close contest between Zanu-PF and the MDC Alliance, as well as between Mnangagwa and Chamisa.
The elections will also be the first in the past two decades not to feature ousted former president Robert Mugabe and the popular late MDC leader Morgan Tsvangirai, who lost his valiant battle against colon cancer in February.
And for the first time in post-independent Zimbabwe, there will also be female presidential candidates – taking on their male counterparts for the right to occupy the most powerful political office in the country after this month’s poll.