Zim economy batters consumers, businesses

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THE cost of living in Zimbabwe continues to rise, putting severe pressure both consumers and businesses.

Consumers’ real wages are being eroded while businesses are battling to stay afloat as inflation and

currency depreciating push up costs and squeeze margins. Zimbabwe’s inflation reached a 10 year

high of 786 percent in May, according to Zimstat, up from 765,5 percent in April.

This week, consumers witnessed a wave of price increases for most basic commodities as businesses

struggle to keep afloat and are passing on increased costs to consumers.

On Tuesday, bakers announced that the price of bread had gone up by between 13 and 22 percent

while the price of a 2kg packet of sugar also went up by 15,8 percent to $147,86 from $127,68.

Fuel, a key component in the running of businesses went up, with the price of diesel increasing from

$20,84 per litre to $24,93 while petrol went up to $28,96 per litre from $21,00.

While the price increases have resulted in sales volumes coming down significantly, businesses are

left with no choice but to charge prices that will keep them in operation even for the reduced sales.

Zimbabwe imports most of its raw materials and finished products, meaning that the cost of foreign

currency becomes a key determinant of the prices that businesses charge.

The foreign currency exchange rate, which started the year at 23 to 1, has continued to run and is

now anything above 70 on the alternative market.

This means businesses that import raw materials such as wheat and maize millers, among others,

will have to charge prices that keep up with the exchange rate.

Even those business that do not necessarily import raw materials, have to contend with increased

costs of service provision and wage demands – costs which will have to be recovered in the midst of

rising inflation.

Mobile network operators are in a similar predicament, as their regulated tariffs continue to lag the

increasing operational costs and a depreciating local currency.

This week, both Econet and NetOne announced they were reviewing their data and SMS tariffs

upwards.

Data bundles are promotional bundles, but the MNOs have been forced to review them as a last

resort because the approved tariffs have become unsustainable.

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