Government has begun taking steps to curb wanton price increases by retailers to avoid plunging the country’s fragile economy into bouts of instability.
The Competition and Tariff Commission (CTC) threatened to come down hard on businesses engaged in excessive pricing of goods in a statement released yesterday.
This is meant to protect long-suffering consumers from unscrupulous entrepreneurs who are unilaterally hiking prices in order to make a killing.
CTC said excessive prices and price fixing were bad business practises that distort the smooth functioning of the economy.
“In this respect, the commission will not hesitate to embark on investigations in sectors identified as colluding or price fixing or excessively pricing with a view to remedy such anti-competitive practises within the confines of the act,” said CTC.
“All producers, wholesalers and retailers are therefore expected to comply with the Competition Act with immediate effect or else face the wrath of the law,” it added.
The Competition Act gives CTC the necessary teeth to enforce its orders and decisions.
It provides that for enforcement purposes, the commission’s orders can be registered with, and recorded as a civil judgment of the High Court.
CTC can sanction offenders by imposing fines, revoking their operating licences or preferring criminal charges against them.
The commission’s warnings come in the wake of massive price increases, particularly of basic goods such as sugar, cooking oil, meat and mealie-meal.
Consumers have suffered massive erosion of their incomes with the poor getting poorer.
The price spirals are also putting pressure on salaries and wages, with unions biding their time before bargaining for higher incomes consistent with the rising cost of living.
Government has been forced to intervene by pronouncing recommended maximum wholesale and retail prices, which are however, not being adhered to.
Recently, minister of Industry and Commerce Mike Bimha announced that government has placed 16 commodities under a “pricing and availability monitoring list” which include cooking oil, mealie-meal, bread, flour, sugar, rice, salt, chicken, eggs, beef, and fresh milk, laundry soaps, washing powder, cement, fuel and energy.
This, according to government, is meant to protect consumers from the rampant illegal price increases.
Retailers and manufacturers defended the price escalations saying they were buying foreign currency on the expensive black market to pay for their imports.
The banking sector is currently clogged with foreign currency applications that cannot be processed due to the shortage of foreign currency.
Zimbabwe is currently in the throes of a liquidity crisis caused by its underperforming economy.
Its economy has not been able to produce enough exports, with imports outweighing exports by a wider margin.
The mismatch between exports and imports has given rise to crippling cash shortages.
Yesterday, CTC urged businesses to operate within the agreed guidelines.
“Historically, CTC has observed that whenever a ‘recommended maximum price’ is announced, retailers or wholesalers have a tendency to all charge that maximum price under the guise of complying with the stipulation.
“While players may use similar formulas to determine prices at which they sale their products, certainly two or more players cannot charge the same price for identical products given the different overheads base, capacity utilisation levels, economies of scale and other costs incidental to operations.
“In this respect, in spite of the ‘recommended maximum price’, the commission expects all players in any sector with ‘recommended maximum prices’, to charge significantly different prices that facilitate competition process.
“In instances where players charge exactly the same prices or price fixing, they will be deemed to have colluded – an offence prohibited under the Competition Act (Chapter 14:28),” reads part of the statement.
CTC is a statutory body established under the Competition Act [Chapter 14:28].
It is a product of the merger in 2001 of the former Industry and Trade Competition Commission (ITCC) and Tariff Commission (TC).
The former had been established under the Competition Act, 1996 (No.7 of 1996) as a competition regulatory authority, while the latter had been established under the Tariff Commission Act [ Chapter 14:29] as a trade tariffs advisory authority.
Both the ITCC and TC had commenced operations in 1998.
The merger of the ITCC and TC was provided for under the Competition Amendment Act, 2001 (No.29 of 2001), which also repealed the Tariff Commission Act [Chapter 14:29].
The CTC has the twin mandates of implementation of Zimbabwe’s competition policy and execution of the country’s trade tariffs policy, with the primary objective of enforcing the Competition Act.
There are fears in business that President Emmerson Mnangagwa’s government could be moving towards a command economy characterised by price controls.
Recently, Bimha ordered bread makers to reverse an increase in the price of bread, and dispatched investigators to look at their pricing models.
University of Zimbabwe economics professor, Tony Hawkins, said the devaluation of the local unit was to blame for the price increases.
“Government is responsible for the 40 percent increase in the money that is circulating in the market which has led to inflation which is higher than the official figures.
They have illegally introduced price controls but we all know that government does not worry too much about illegality so prices will continue to rise no matter what they do,” Hawkins said.
“Pathetic allocations (of foreign currency) by the Reserve Bank of Zimbabwe are forcing companies to go to the parallel market for foreign currency where they are asked higher premiums, and this in turn is causing prices to rise,” he added. DailyNews