Price Cuts Herald Economic Revival
ZIMBABWE is poised for positive economic growth with recent commodity prices and service charges adjustments setting the tone for the desired turnaround, analysts have said.
Government has set the tone for economic recovery in a move that has seen firms and service providers slashing prices to ease consumers’ burden while facilitating increased demand for goods.
Economic analysts have hailed the move and commended firms that have cut prices to lay a strong footing for domestic growth.
The move is also expected to ease pressure for increased salaries from workers by increasing value for the little money they earn.
Bakeries last Friday slashed the price of bread by 10 percent and effected the adjustment this week.
A loaf of bread now costs an average of $0.70 with the standard loaf pegged at $0.90.
Mobile phone operators set the tone in January when they cut voice call charges to $0.15 per minute from $0.25 and $0.05 for SMS from about $0.09.
In the same month, filling stations slashed the prices of petrol and diesel in light of falling global oil prices.
Delta Beverages joined in by slashing prices for a variety of its products with a 330ml can of soft drink now pegged at $0.60 from $1.
Cooking oil producers have progressively reduced prices in the last two years to almost at par with imported ones at $3 for a 2-litre bottle, from about $4.
The transport sector has also responded with luxury coaches plying the country’s major highways cutting fares by an average $5 per trip.
Last week, bankers pledged to cut charges for their services to consolidate customer confidence and boost growth.
Significant progress is set to be achieved in the context of the newly introduced bond coins, which have buried the problem of change and price distortions.
The bond coins are indexed at par with the United States dollar and are found in denominations of 1c, 5c, 10c and 25c, with the 50c expected anytime this month.
Several businesses such as hoteliers, newspapers, retailers and players in the construction sector are also warming up to price reductions and are already running promotional sales at lower prices.
Ian Ndlovu, an economics lecturer at the National University of Science and Technology, said price cuts have a huge impact on economic turnaround.
“This is quite significant, especially in a deflationary economy like ours. It’ll have a long-term impact in terms of disposable incomes. It will translate to thousands of dollars within half year for the bakery industry for instance,” said Ndlovu.
“It means consumer saving will increase and this will obviously release income for other services.”
Confederation of Zimbabwe Industries’ Busisa Moyo said dropping prices was expected to increase business volumes.
He, however, urged the Government to incentivise growth by looking at the whole economy in terms of arresting costs of production.
“Growth can’t be achieved by cutting prices alone. We need to balance costs all round by bringing all costs down. We need to look at rents and rates and inspection fees as well,” said Moyo.
Another economic analyst and Bulawayo businessman Dumisani Sibanda said progressive businesses should reduce prices to fast track domestic growth.
“The Government has taken a clear position that the cost of doing business must go down. Costs should be reduced and already there is a Cabinet position on that.
“If all businesses heed the call this will quicken the pace of our economic turnaround,” Sibanda said.
Finance Minister Patrick Chinamasa has said price cuts would curb the abuse of the US dollar, which was being devalued by some business sections for profiteering purposes.
The experts, however, said price cuts should be supported by increased financing of the economic blue-print, Zim-Asset, in order to increase economic activity by boosting industrial protection and attracting investment.
“We hope Zim-Asset gets adequate funding so that we begin to revive firms and increase production. We also need the support of the international community as we don’t have capacity on our own.
“Engaging external financers and addressing our external debt is critical in this regard. Right now we’re constrained in terms of stimulating the aggregate supply side of the economy,” Ndlovu said.