Government, whose responsibility is to protect the consumer and ensure stability, will “take all measures necessary”, including painful ones if need be, to ensure price stability, the President has said.
Business, he added, was seemingly squandering Government’s goodwill, privileges and incentives to profiteer and, in some instances, illicitly transfer funds “beyond our borders for stashing”.
Writing in his weekly column for The Sunday Mail, the President said the authorities were aware that some businesses were disconnecting point-of-sale gadgets, discouraging sales in local currency, abusing the foreign currency auction system and channelling goods to the informal market through a shadowy network of agents.
There was no way the exchange rate could be unstable given the increased inflows from record foreign currency receipts and the pervasive use of the United States dollar in local transactions, he said.
The trend has continued in the January-March period this year, as foreign currency receipts have grown by more than 20 percent compared to the same period last year, with cumulative earnings likely to rise to a record US$12 billion this year.
“The more than US$11 billion foreign exchange earned last year is the highest ever done by this economy, and is certainly far higher than in most economies in Sub-Saharan Africa, outside South Africa. Sadly, this has not translated into a stable exchange rate,” President Mnangagwa said.
“Government has pursued prudent fiscal and monetary policy to guarantee macroeconomic stability. Since the advent of the Second Republic, Government budget has run on a cash basis, thus avoiding un-budgeted overruns. This has never been so before, including under the
much-vaunted Government of National Unity, GNU. Because of this fiscal discipline, often pursued even at the expense of social delivery, space has since been created for businesses to grow in a stable environment where disequilibria are minimised. Indeed, this has been the case until now.”
He said it was curious that despite 80 percent of transactions being in foreign currency, with business allowed to retain most it, demand for foreign currency on the foreign currency auction – which has allocated US$4 billion since it was launched on June 23, 2020 – has risen, yet production in the sector has remained the same.
“Fourth and most exasperatingly, when 20 percent of our transactions were conducted in foreign currency, and 80 percent in local currency, the demand for foreign exchange at the auction averaged US$20 million weekly,” he said.
“Today, when we find ourselves in 80-20 percent reverse transaction equation in favour of foreign currency, the demand for foreign exchange at the same auction, and by the same Business now directly selling more wares in United States dollars, has risen to US$30 million a week! How does one explain such a paradox?”
The President reminded business that all the concessions that were being extended by Government were a privilege that was being abused and could be easily withdrawn.
In most jurisdictions, he said, the common practice was for business to liquidate all its foreign currency earnings in the local currency.
He, however, indicated that Government will do everything in its power to protect the consumer and ensure stability both “in the market and inside the country”.
“Above all, short-circuiting set rules and cutting corners in business attract very stiff sanction. Those who break our exchange control rules, or who money launder, will only have themselves to blame. No one in business should doubt my Government’s resolve to correct blatant market failures, and to counteract and foil sinister moves to destabilise our economy,” he said.
“Government’s responsibility is to protect the consumer, and to ensure stability in the market and inside the country. We will take all measures necessary to ensure there is stability, including painful ones should that ever become necessary.”
The President also said he was disappointed that at a time when business should be joining hands with Government to in support the ongoing drive to clear the country’s arrears and resolve its debt, some elements in the sector had decided to engage in activities that were destabilising the economy.
This comes as a high-level Government committee set up to monitor and investigate the recent spate of price hikes is finalising its work and expects to submit its recommendations this week before they are considered by Cabinet for implementation.
The committee, led by the Ministry of Industry and Commerce, is investigating developments that prompted businesses to increase prices of goods and services.
It is also looking into reported stockouts of basic commodities in some retail outlets.
Industry and Commerce Permanent Secretary Dr Mavis Sibanda told The Sunday Mail that the committee was literally working around the clock to enable it to present its findings this week.
“I have instructed the committee to work 24-hour shifts, including over the weekend, because we want to get the findings soon,” she said.
“The report will be submitted to Cabinet but the investigations are still work in progress.
“They haven’t finished yet and I am hoping to get the final document soon so that we can look at it and submit it to Cabinet.”
Dr Sibanda said the committee was looking at a broad range of issues, including unjustified price hikes, unfair business practices and why some businesses are refusing to transact in the local currency.
“There is really a lot of work to be done,” she added.
“The committee also includes people from the National Competitiveness Commission, Competitions and Tariffs Commission and the Ministry of Industry, so that we look at things from a broader point of view.
“They are really working hard to find out and bring back some answers.”
Government, she also said, was keen on protecting consumers from unfair business practices.
The committee was also assessing the quality of goods being supplied on the market.
“The committee also covers things to do with trade measures and issues like whether we are getting proper weights of products which we are being sold.
“You know there are standard weights that are permissible.
“All those things should be included,” she said.
Government is presently engaging the private sector over the price escalations, which are threatening to put most basic commodities beyond the reach of many.
Prices of basic commodities like mealie meal, sugar, bread and cooking oil have markedly increased in the local currency.
Some retailers have since resorted to pegging prices using parallel market rates.
Addressing last week’s post-Cabinet press briefing, Information, Publicity and Broadcasting Services Minister Senator Monica Mutsvangwa said the Consumer Protection Commission will also set up a hotline to receive and respond to complaints from consumers in order to mitigate unfair business practices.
“The Quality Assurance and Trade Measures Department in the Ministry of Industry and Commerce is conducting an enforcement blitz on the quality and measurements of basic commodities and issuing appropriate fines,” said Minister Mutsvangwa.
“The Consumer Protection Commission is creating a hotline that will receive and respond to complaints from consumers to mitigate unfair trading practices in the market.”
Treasury recently introduced a raft of measures, including removing duty on imported basic goods and allowing businesses to retain 100 percent of their foreign currency revenue, to help stabilise prices.
The Sunday Mail