Zimpapers Logo

Temba Dube Deputy News Editor
LOCAL companies should reduce prices of their products to remain in business as they risk losing the entire market to foreign firms, Finance and Economic Development Minister Patrick Chinamasa said yesterday.

In his 2015 national budget speech yesterday, the minister said cost management remained a strategic imperative across the economy, including in the private sector, adding the high pricing structure was not sustainable.

Minister Chinamasa said the cost structure in the country’s economy made businesses fail to compete against trading partners.

He said Cabinet has approved a wide range of business friendly recommendations made by the Ministry of Industry and Commerce aimed at addressing cost drivers in line with regional trends.

Minister Chinamasa said the “abnormal” prices prevailing in the country were a legacy of the hyperinflationary period mentality experienced between 2007 and 2009.

“Our companies, therefore, need to adjust such prices, lest they suffer from external competition over the domestic market,” he said.

Using Poverty Datum Line figures, he illustrated that it was almost twice as expensive to live in Zimbabwe compared to neighbouring countries like Botswana and South Africa, due to flawed pricing policies.

According to the figures an individual Zimbabwean needs $100,58 to buy basic commodities every month.

This is compared to $41 needed by a Namibian, $52,40 in South Africa, $53,44 in Botswana and $80,21 required by a Malawian to buy the same basics in their countries.

Minister Chinamasa blamed the discrepancies on “domestic wages and prices that were generally set with a mindset of the hyper-inflationary environment” from the outset of the adoption of multi-currency pricing.

At the time, prices ceased to have meaning as they changed at the drop of a hat and businesses maintained the high pricing structures at the changeover and beyond.

The minister urged the private sector to address the issue of pricing for the recovery of the economy.

Inflation, he said, was projected to remain below one percent for the rest of the year, and would remain subdued in 2015.

The minister said: “The environment of near negative inflation also reflects, in part, self-correction to the price structure which has generally left most of our domestic prices for goods and services higher than those prevailing in some of the neighbouring countries, notably in South Africa.”

He said the country also needed to do away with its method for determination of PDL levels.

“The current practice in Zimbabwe is to base the Poverty Datum Line on a family of five, estimated at $502,9 as at the end of September 2014. In other countries in the region, reference to the Poverty Datum Line is per individual,” he said.

He said this was done to relate PDL to labour productivity, competitiveness and comparison with other economies.

“It is, therefore, necessary, Mr Speaker Sir, that our determination of Poverty Datum Line (PDL) levels be individually based, in line with international best practice,” said Minister Chinamasa.