New government policy to worsen shortage of basics

By Tererai Karimakwenda
16 November, 2007

In a move that has been strongly criticised by economic experts, the National Incomes and Pricing Commission (NIPC) recently ordered businesses to clear their existing stock of imported goods by Thursday next week and adopt new prices based on the official exchange rate. The order came with a warning that those who buy their foreign currency on the black market would be prosecuted. The move will affect many businesses negatively because the government does not have enough foreign currency to sell to them. Businesses in turn will not be able to afford new imported stock or inputs and consumers will see more severe shortages of already scarce essential goods.

Economist Erick Bloch explained that the new policy applies to retailers, wholesalers and manufacturers, and everyone who imports finished products or materials used to produce them.

The new regulations were announced by Godwills Masimarembwa, the recently appointed NIPC chairperson. He is quoted as saying: "We held a meeting with business last week on Friday informing them to clear stocks by November 22 on the basis of existing prices. From November 23 restocking should be on the basis of the official exchange rate."

Given the scarcity of inputs locally and the shortage of foreign currency from the official sources, businesses are due to have a tough time. Bloch described the new pricing policy as “a nail in the coffin for many businesses”. He said: “Many businesses completely depend upon imported inputs for their manufacturing purposes, and similarly most retailers right now have been relying upon imported goods because the local manufacturers cannot afford, under price controls, to produce goods.”

Bloch said in reality there is such a scarcity of foreign currency available that the importers, retailers, wholesalers and manufacturers, cannot obtain currency on the official market. He said businesses are obtaining goods from runners and foreign currency traffickers, which forces the prices for consumers to skyrocket. Ironically, government accuses businesses of overpricing when it is clearly its own policies that are destroying the country’s economy.