Price distortions killing economy

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Mamvura’s Market Minute
What would an earnings season be without five companies holding briefings on the same day?

Fortunately, for the first time in a while, those corporates reporting on Wednesday tried as best as possible to space out their results.

Two banks were due to post year end results, one of them Barclays, which was scheduled to hold its briefing nearly three weeks back.

This one, Mamvura awaits with interest, having had a conversation in Blantyre in January about the “real value” of assets in Zimbabwe.

At the time Mamvura declared that not in a month of Sundays would any accounting firm in Zimbabwe mark a TB book to market (the accountants excuse is that there have been no defaults on maturity). Oh, and at what rate do you value assets in Zimbabwe?

Broadly, as noted a few weeks back, turnover/income/revenue has risen by 20 percent to 30 percent, which mostly reflects price distortions in the economy given the cost of forex paid by most companies.

There is also increased profitability, due largely to improved margins on the back of a higher top line. Many expenses such as wages and utility costs have remained unchanged, while the cost, for example, of printing a salary slip has gone up 50 percent or more.

Full commentary will remain reserved for now as Mamvura highlights some observations of his recent trip to Victoria Falls.

Here is a fairly self-contained economy that should be free of price distortions given forex retention and the THOUGHT, yes the thought, that hoteliers would know something about how to price “the experience”.

Forget the overpriced accommodation — for the most part Mamvura was residing in National Parks — this is one town where many find KFC is NOT an expensive dining option. But it is not so much the price of meals, but the wild distortions in beverages between the operators.

Two hotels, that are almost opposite each charge, respectively, $1,50 and $4 for a local beer. The second hotel is putting $2,50 to the bottom line and if you know what the other hotel is charging, or if you happened to pop into a supermarket . . . this just makes the beer taste bitter.

How is it that high end hotels also always serve lukewarm beer?

At another hotel, a tot of Jameson costs an outrageous $8! In other words, after four tots, you’ve paid for the bottle. That’s just not on and tourists know the price of Jameson as it is always a Duty Free special.

If people in the industry can work out what prices should be, someone should go around and give “guidance”.

General drinks guide is 100 percent GP, so in the case of Jameson, you should make at least $60 from 22 tots.Let us allow Vic Falls hotels to make $90 a bottle — that is $4 a tot. At $8 a tot, the hotel is grossing an unacceptable $176. The same hotel charges $40 for a bottle of Zonnebloem Cabernet Sauvignon (TM $12 or so). Where is the justification?

After agonisingly watching his guest take 30 minutes to get a Kaza visa at Harare International, another myth needs to be smashed — the so-called “capacity constraint” at Victoria Falls airport. This is due entirely to the inability of immigration to process people efficiently because of the “visa”, in effect a tourist tax, which could be collected so much better — like in the departure lounge.

Fortunately, the destroyer of tourism that did so much long term damage — roadblocks — are largely gone, leaving the other post-dollarisation hindrance — tollgates. Once again, if you want to collect a tax, try and do it efficiently.

Seven swipes between Victoria Falls and Harare took the daily bank statement to three pages. You couldn’t make it up.

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