Basic commodities disappear

…As producers eye US$ sales

June 23, 2022

 

LIVINGSTONE MARUFU/ LETTICIA MAGOMBO

 

Basic commodities have disappeared from the shelves amid indications that manufacturers are selling to informal traders in foreign currency owing to the depreciation of local currency against the greenback.

In a survey carried out by this publication, products like cooking oil, soap, fresh milk and sugar among other goods were not on the shelves for a couple of weeks.

But the same products are available at informal traders’  so-called tuckshops, that sell in foreign currency.

The Confederation of Zimbabwe Industries (CZI) recently said the disappearance of basic goods had escalated.

“Goods are vanishing from shelves into grey markets where they are priced in US$ only and there is a general inability to replace stocks in the market,” CZI said.

CZI president Kurai Matsheza told Business Times that there are some goods that are scarce in shops due to subdued  production and  high  cost of production.

“Cooking oil and soap are some of the major basic commodities  that  are missing on shelves but this is due to the increase in crude oil prices which has increased cost of production and reduced production capacity,” Matsheza said.

He said high costs of inputs due to surging inflation and diminished export competitiveness due to heavily taxing exporters through the parallel market premium on surrender requirements are affecting the industry.

The economy is currently experiencing a sharp increase in prices for basic commodities especially cooking oil and mealie-meal which are fast disappearing from shop shelves because of speculation by both consumers and suppliers.

Retailers and wholesalers said this week that there has been growing demand for foreign currency  payments along the value chain that have left them in a difficult position to compete with the informal traders who solely trade  in US$.

The ZWL$ has been declining in value over the past few months resulting in the continued rejection of the currency by businesses.

Businesses are now demanding forex as it is more stable and is more likely to ensure their survival in the long run.

Speaking at the Retailers and Wholesalers Indaba held earlier this week Confederation of Zimbabwe Retailers president Denford Mutashu told the delegates that businesses were struggling to survive in the current operating environment.

“It is quite critical now that we stay afloat because there is a fight for sustainability by the majority of businesses. It is a very difficult balancing act where you must price for affordability and still be able to price to remain alive in business. It is a catch 22 situation.”

He added that consumers were also at the receiving end of it.

“They [consumers] deserve affordable prices, but they may not be aware of the value chain challenges that affect the businesses that produce that particular product and deliver it into the supermarket.”

The main value chain issue affecting retailers is that of the foreign currency availability.

Mutashu said: “…it is very difficult for a supplier or manufacturer to give me a product where I am paying in ZWL$ understandably because they would also want to use their product to generate foreign currency from their own internal source.

“It’s a very difficult environment that we find ourselves in and some are experiencing product shortages from the many challenges being faced by manufacturers and suppliers.”

He said the  only way to resolve the current crisis is through a joint effort between business and government. The collaboration should seek to improve the pricing of goods and services, reducing the negative impact of the multiple exchange rates and the impact of the illegal parallel market exchange rate and the impact of the pressure on the supply chain bottlenecks, availability of foreign currency and improvement of the business environment.

  1. Richards Group director Archie Dongo said suppliers are demanding forex payments for their products with little prospects for settling the remaining US$ invoices in ZWL$ at any rate.

“In some instances suppliers are even demanding prepayment in forex,” he said.

“Where the ZWL$ is accepted we tend as retailers and wholesalers to be subjected to forward rating and this forward rating on ZWL$ prices then condemns the ZWL$ invoiced product to be uncompetitive so this is replacement costing which is imperative in hyperinflation. That is what is happening, and we are feeling the effects as retailers,” Dongo said.

 

Dongo added that the demand was not only coming from suppliers but manufacturers as well and the result of this will be product shortages.

He said: “In addition, primary producers and raw material suppliers who are manufacturers further down the value chain are demanding US$ payments and these demands are being passed on to us. We in turn have no choice but to pass this on to our consumers, so this is how dollarisation along the value chain from the very beginning from the producer, manifests itself on formal shop shelves right in the face of the consumers.”

He said while manufacturers may be experiencing improvement in capacity utilisation in some instances and their product/ volumes are growing their products will increasingly be missing from the shelves of wholesale and retail due to our inability to meet this demand for forex payments.

The retail and wholesale sector currently contributes about 20% to the Gross Domestic Product.

The Consumer Council of Zimbabwe (CCZ) said some supermarkets who still have these basic products in stock are failing to display the prices in violation of the Consumer Protection Act section 26 which states that the consumer has the right to disclosure of information regarding goods and services and disclosure of prices.

“The CCZ have noticed that some retailers [mostly local tuck shops] are selling a two-litre unit of the product for between US$5,50 and US$7, resulting in consumer panic and a further spike in prices,” CCZ said.

 

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