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THE Reserve Bank of Zimbabwe (RBZ) says local businesses must seriously consider revising their high cost business models and reduce their prices in line with economic fundamentals if they are to survive the face of increasing competition from imports.

Central Bank Governor John Mangudya said demand for goods and services in the country remained firm in spite of prevailing economic challenges.

But it is the high pricing by local firms that pushed consumers to buy imported products.

“The only way to be competitive in an open economy is to reduce prices,” Mangudya said on the sidelines of a recent economic meeting.

“Businesses in this economy have been rounding up prices since 2009 but it’s now time to round down.”

He said local products remained uncompetitive on the market due to high prices compared to imports.

As a result, most local businesses were complaining about reduced consumer demand when in fact imports of the same products were on the increase, he said.

“We need to be practical and pragmatic, there is no demand that is subdued in this economy because people are importing,” he said.

High levels of imports have seen the country’s balance of payments remaining in the red in over five years as imports continue to outrun exports.

Official figures show that the country’s trade deficit stood at $3 billion at the end of 2014.

Mangudya said the tendency to overprice commodities and services as well as the “get rich quick” mentality carried over from the Zimbabwe dollar era were obstacles to economic recovery.

“Let us break away from the past, we need to change our business models,” he said.

He said the recent introduction of bond coins was also meant to allow local businesses to “round down” prices which had been rounded up in the past due to shortage of small change.

The bond coins, which are at par with US dollar coins, are in denominations of 1c, 5c, 10c and 25c and were introduced in the market last December.

Zimbabwe has faced small change problems since the country adopted use of multi-currencies in 2009.

The central bank chief said reducing prices would also increase the buying power for consumers which meant that there would be no demand for salary increases especially when the economy is not performing.

Meanwhile, the Consumer Council of Zimbabwe (CCZ) regional manager for Matabeleland. Comfort Muchekeza, said retailers should reduce prices in light of falling oil prices.

“Fuel plays a very important role in the pricing of goods. For many years the increase in prices of basic commodities has been attributed to high fuel prices. Retailers ought to reduce their prices in order for consumers to benefit from the recent fuel prices reduction,” he said.

“The government is working towards creating a practical pricing system. Fuel prices reduction is the first step. All sectors should follow suit.”

Economic analyst Davison Gomo said retailers should recognise the drop in fuel prices by adjusting their prices.

Simba Phiri, the secretary general for the Retailers’ Association of Zimbabwe Bulawayo chapter, however, said price reduction in the sector must be determined by manufacturers.

“Fuel has always been a major cost of doing business, but retailers can only reduce prices if the suppliers who are the manufacturers also reduce their pricing. It doesn’t make sense for a retailer to reduce prices when manufacturers have not reduced. It’s a loss on the part of the retailer,” he said. — New Ziana/Chronicle Business Reporter.