Import duties drive up food prices, hurt poor

HARARE, 26 August 2011 (IRIN) - Barely a month after the Zimbabwean government reintroduced duties on imported food items such as cooking oil and maize meal to protect local manufacturers, the move appears to have backfired, making essentials unaffordable for low-income consumers.

The government scrapped import duties on cooking oil, sugar, maize meal, meat, salt, soap and other basic goods in 2009 to encourage the flow of these commodities into the country after the emptying of shop shelves in the wake of hyperinflation.

A quick survey by IRIN revealed that the price of all basic commodities has shot up recently. Two litres of cooking oil which cost US$4 a month ago was up by almost a dollar; a bar of washing soap cost up to 80 US cents more; while margarine rose by 40 cents and imported chicken was selling at around a dollar more in some shops.

Tendai Biti, the finance minister, announced the reinstatement of import duties on basic commodities in July 2011.

However, local industry remains depressed. John Mufukare, secretary of the Business Council of Zimbabwe, told the media recently that local firms had failed to achieve the 60 percent half year production targets due to financial constraints. [ http://www.zbc.co.zw/news-categories/business/10331-local-industry-fails-to-achieve-target.html ]


Meanwhile, Innocent Makwiramiti, a Harare-based economist and former chief executive officer of the Zimbabwe National Chamber of Commerce, put the blame squarely on local manufacturers.

"We have observed that locally produced goods feature prominently in the list of commodities whose prices have gone up sharply. There is no reason why that should be so and the only explanation is that they are doing it for speculative reasons and out of greed," Makwiramiti told IRIN.

He feared that some manufacturers, wholesalers and retailers would create artificial shortages by hoarding goods, thereby pushing up prices.

Welshman Ncube, the industry minister, promised investigations into the price hikes, which he described as "unjustified".

"We will ask the Consumer Council of Zimbabwe, the Competition and Tariffs Commission and the Pricing Commission to look into the price hikes and establish if the emerging pricing pattern is out of speculation. We will take stern action against the offenders," Ncube told IRIN.

However, economist John Robertson warned against introducing price controls. "Price controls will have a disastrous effect on the economy. Several years ago, the government tried it and we had biting shortages as producers decided to stop operations or simply hoarded the commodities, which went to the black market and prices rose steeply," he told IRIN.

"Struggle to survive"

Moses Zirima, a teacher in Harare with a family of four, said: "Prices of basic commodities have been sharply increasing in the last three weeks and the struggle to survive has intensified for people like me. My family has cut down on the amount of food we eat on a daily basis because we can no longer afford big amounts of sadza [thick porridge] and meat."

Zirima, like other civil servants, was awarded a paltry salary increment in July, and even before the recent wave of price hikes he was struggling to make ends meet.

"Given that the salaries of the majority of the people are still poor, the decision by the government to reintroduce duty on basic commodities is ill-timed. Most of us don't think that prices should rise at this rate especially given the fact that we are using foreign currencies which should be stable," added Zirima.

The coalition government set up in 2009 adopted multiple foreign currencies to replace the local dollar which had been rendered useless by the world's highest hyperinflation rate, and the move helped bring down inflation to below 2 percent. [ http://www.irinnews.org/report.aspx?reportid=82500 ]

Health threat

The hike in prices has forced people to source essentials such as illegal cooking-oil produced in unhygienic conditions.

Tecla Sibanda, a vegetable vendor from a low-income suburb in Chitungwiza, about 35km south of Harare, told IRIN she had opted to source homemade cooking oil from illegal producers. Sibanda said several people had fallen ill after using the oil for cooking in the past but "we will cross that bridge [the possibility of falling ill] when we come to it.

"My family shares a house with three other tenants and we had an arrangement that we would take turns every week to buy basics such as cooking oil and mealie-meal and then share. However, the price increases that we are seeing taking place have rendered that impossible, so each family for itself.

"I learnt from one of the tenants that the backyard businessman who used to supply homemade cooking oil during those days of shortages had resumed operations, so that is where I am buying from now and the queues that form at his shop show that many people are doing the same," said Sibanda.

The informal sector, which has helped many Zimbabweans to survive by selling imported foodstuffs, has been particularly affected by the re-imposition of import duties.

"These [price hikes] are worrisome developments which, if not addressed, will reverse the gains made in overall macro-economic stabilization," said Finance Minister Biti at a recent press conference.