Reverting prices could result in shortages of basic commodities

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Harare – Recent order by the Government that businesses should revert their prices to the 25th of March 2020 could result in the shortages of basic commodities, the Zimbabwe National Chamber of Commerce (ZNCC) has warned.

According to the report by the News Day, in a new research document titled ‘Sustainable and Friendly Interventions to Addressing Price Spiraling During The Lockdown’, ZCNN said retailers have been ignoring the order to revert their prices as inflation continues to rise rapidly.

The document reads:

“As Zimbabwe National Chamber of Commerce (ZNCC), with membership across all the value chains of the economy, was not consulted when the decision on the price freeze was implemented … This is not the first time that price controls have been introduced in Zimbabwe. In 2007, the economy came to a halt due to price controls.

“With products to be affected by the price moratorium set to include basic commodities; sugar, rice, maize meal, cooking oil, salt and bread, price freeze of these commodities may decrease product availability from manufacturers and producers which will spawn shortages on retail and wholesale shelves. The suppliers of the basic commodities have not reduced the prices as
yet.”

The ZNCC  revealed that price control would see manufactures, especially those operating at a lower capacity, stopping the production because of the unattractive prices in the market.

The document reads:

“Though the overall objective of price controls is to lower prices for consumers, controls distort market forces of supply and demand and can lead to serious shortages of goods and services, thereby worsening the problems on the market rather than solve them.

“In terms of competition, any price control removes the rivalry among business people, hence it kills competition. Price setting/control is bad for competition.”

The ZCNN said the price control order is focusing on the retailing side of commerce and ignoring its impact on the production side and up to the moment there is no research or analysis which has been conducted on the the value chains and costs of production to support this price control move.

Given that the utilisation is at below 40 % on its average, full implementation of price control order in an economy which is characterised by inconsistency economic policies could be an immense detriment to the industry of the country.

 

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