eBusiness Weekly
Amid all the nonsense of the last fortnight, especially the last weekend, the formal retail and wholesale sector and most manufacturers have emerged with credit and their integrity intact, while the wilder elements in the economy have been exposed as both greedy and eager for short-term gain over long-term customer relationships.
To return to fact, and moving away from the Zimbabwean hobby of rumour mongering, now spread faster through social media and muddied by assorted political agendas, Zimbabwe is returning in many ways to the managed import regimes that ruled from the 1960s to the 1990s. If anyone is looking for historical parallels they can be found in the mid-1990s rather than 2008.
Of course there are differences, some very large, but generally speaking the combination of the Reserve Bank of Zimbabwe managing a large chunk of import earnings and SI64 removing a wide range of imported products from import on demand is producing roughly the same sort of result. Essential imported goods, and Zimbabwean-manufactured goods, have largely stable prices while the prices of imported non-essentials fluctuate according to a combination of parallel market rates and deliberate secrecy by many players.
Unfortunately to make a more managed economy work a little smoother some further intervention by the authorities may be needed, although in the more market-orientated economy of today the leading roles can be taken by the RBZ and Zimra.
To take one example, petroleum fuels. The Reserve Bank allocates adequate foreign exchange to maintain suppliers. Service stations pay for their deliveries with bank transfers. No one hands over shoe boxes of $2 notes to the drivers of petrol bowsers. Over the weekend, when there was panic buying after stupid rumours flew around on social media, most service stations connected with the largest suppliers maintained their traditional policy of selling fuel for payment by banknotes, bond notes or point-of-sale machines.
Some, mostly the smaller independents, started demanding “cash-only”. It is difficult to come to any other conclusion that they were double dipping and were planning on exchanging their cash for larger electronic transfers at a premium. That cries out for RBZ action since the bank has a rule that retailers must bank the bulk of their cash takings the following business day. We suspect the “cash-only” service stations did not do this.
Even in the overtraded Harare fuel market the number of service stations is measured only in the scores, so it would be easy for the RBZ to assemble a list of stations that demand cash (two officers in one car could get this in a day if all else fails) and then check their accounts and, looking at simple records of deliveries and stocks, work out how much cash should have been deposited and compare this with how much was actually put back into the banking system. Action can then be taken on the rule breakers. Even if they were forced out of business the big companies could easily take over their customers, so there would be no suffering by the general public.
A second example is slightly more complex, that of cooking oil. Here, as the RBZ has noted, there appears to be a complete lack of co-ordination between manufacturers, farmers and financiers although Command Agriculture is being expanded this next season to include soyabeans. The RBZ has now released official forex to import soyabeans or crude soya oil so presumably supplies return to normal soon, but we agree that manufacturers need to think harder about their supply chains.
For a start there was a good cotton harvest last season. Lint is largely exported and some seed is retained for the next crop. But the bulk of seed should be available for processing. What happened to it? Contract farming of soya and sunflower is another route open to manufacturers. And finally everyone needs to think about other sources. For example rape is grown in just about every backyard in Zimbabwe as a vegetable leaf. But it is grown in other parts of the world as an edible oil seed, that canola oil you sometimes see. So we know it grows on most Zimbabwean soils yet no-one here has really tested its seed yields or worked out the costs and likely prices. Someone should.
There are a lot of other openings that need to be exploited for a lot of other products.
A third example is the arrival in the market of imported products at prices well below those of official imports or local manufacture. Anecdotal information strongly suggests that these have been smuggled in and duties have not been paid. Hopefully Zimra can close that hole. The market will work more efficiently if everyone plays by the same rules.
Generally, as noted, the formal sectors are working credibly and this should turn into better business for them, as more consumers start trusting local manufacturers who play by the rules and trust retailers who work on fixed percentage mark-ups and, because they obey the banking rules, are not worried about how customers pay so long as they do pay.
