ZIMBABWEAN companies and consumers are facing severe pressure from rising cost of living as well as effects of the coronavirus pandemic, analysts have warned.
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 has resulted in the country’s poverty datum line rising by 16 percent to $7 425 in April for a family of five, according to official figures.
Former Finance minister Tendai Biti said the government’s disastrous policies were fuelling inflation and called for improved production across all sectors of the economy to avert a catastrophe.
“There is a shortage of foreign currency in this country because we are not producing,” he said, adding that the government’s decision to stifle mobile money and electronic transactions among other were “actually making the parallel market rate go on fire”.
Last 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.
Bakers announced a 36 percent hike in bread prices while the price of a 2kg packet of sugar also went up by 15,8 percent to $163,02 from $147,86.
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 80 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 (MNOs) are in a similar predicament, as their regulated tariffs continue to lag the increasing operational costs and a depreciating local currency. Econet and NetOne last week also 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.
Economic analysts Sikhululekile Mashingaidze said it was critical for President Emmerson Mnangagwa’s government to use the Covid-19 pandemic to count the human cost of bad governance and channel the country on a path to reform.