Price Controls force milk and cooking oil off the shelves in Bulawayo

By Violet Gonda
22 November 2006

Rather than continuing to lose money, retailers in Bulawayo are said to be withholding milk products and cooking oil stocks as the battle over price controls continues.

Supermarket owner Eddie Cross said retailers simply cannot recover their costs at present and are sending the products back to the manufacturers instead. He was told by TM and OK Supermarkets that they had withdrawn all cooking oil stocks and sent them back to the manufacturers. National Foods and Olivine confirmed they are receiving their products back from retailers.

Cross said; “One of the major producers here in Bulawayo said they were not distributing milk to retailers because the controlled price which the retailers were allowed to charge customers was below the cost of production.”

He added; “Then today we saw the withdrawal of cooking oil from the market and I am told by manufacturers that retailers started returning products on Monday and the reason again was price controls from the government.”

The private sector says this is a crisis created by the government, which is forcing them to reduce retail prices but failing to address the manufacturing costs and the price of raw materials. The problem is largely in the direct cost for manufacturers. They buy foreign currency on the parallel market and are importing products, raw materials at prices based on parallel market rates. Then they still must charge more for the product when it goes on the shelf.

Analysts say it is a matter of elementary economics. If the costs of production exceed the retail value, the manufacturer is losing money. If a business continues to lose money it cannot survive. It is a lesson that appears to be lost on government.

In Bulawayo price control officials are reported to be maintaining a very intensive watch on all retail outlets and this could lead to many other products being withdrawn from the market. These same products will then find their way onto the black market, at much higher prices.