Is it the beginning of the end in Zimbabwe? Panic buying swept through the streets of Zimbabwe on Wednesday, reports The Guardian, as stores ran out of basic goods and shopkeepers complained that they were selling goods at a loss after the government ordered prices to be halved in a last-ditch effort to tackle hyper-inflation.
Zimbabwe Civic Action Support Group Sokwanele sets the scene:
The Robert Mugabe regime continues to turn logic on its head in its desperate efforts to stay in power. In trying to avert street protests over its management of the economy, the regime has decreed a slash in prices of up to fifty percent for all businesses. Officially, the regime says business must revert to prices that were current on 18 June 2007.
Businesses in Zimbabwe operate on a replacement costing basis; which means they factor in inflation and estimate what it will cost them to replace stock, and price their goods on at basis. The logic is simple enough: if they do not do this, they will be the cheapest in town for a week or a month, but their businesses will go bust shortly thereafter.
Businesses have been forced into replacement costing because of the hyperinflationary conditions brought about by a regime that prints money on a daily basis in defiance of “bookish economics.” All businesses are affected because all of them have two major components in their expense budgets: salaries and fuel.
Fuel is imported and anyone who wants it has to pay the price that the seller is offering. This means that a baker, for instance, who faces daily power cuts in his bakery or supermarket, is forced to use large quantities of diesel to power his ovens. So that pushes his cost of production up. In the meantime, his employees have to contend with rising costs of transport to get to work because the transport operators logically pass on the high cost of…fuel!
Spending up to Z$400,000 a week to get to work is far beyond the salary of a bakery employee when he has to feed his family, pay rent, let alone school fees on top of his transport costs. So the employee either stays at home and ekes out a living selling vegetables, or asks his bakery employer to pay him a higher wage. When the baker has added up all of these expenses, he has to sell his bread at a price that allows him to replace the flour, pay the employee, and replace the diesel at a ‘guesstimate’.
The Robert Mugabe regime calls this ‘economic sabotage’ drawn up in London and Washington. The baker simply wants to run his business, the employee simply wants a job so he can look after his family, and the customers simply want their daily bread. The Robert Mugabe regime wants them to eat dust. The result of their umpteenth ill-conceived intervention in the economy is exactly that: dusty shelves in the supermarkets with little or no product.
That is not all, however, because that would not be much fun. As stated earlier, the official instruction is for businesses to revert to June 18 prices and posses of men from the President’s Office are arriving at supermarket doors and factory gates to ensure compliance with this directive. At the same time, there is a parallel group made up of militias that arrives at the same premises hours later — usually just before close of business — and orders the business people to sell everything at 50% of the prices.
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By strange coincidence, a mob is always at hand to empty the shelves within minutes, taking advantage of the bargain basement 18 June prices. When store managers resist, they are threatened with violence. The results? A bourgeoning black market, and empty fridges and shelves in supermarkets right across the country.
In the meantime, public transporters who cannot be effectively monitored are still charging current prices. Workers are demanding more money in order to be able to get to work and employers have no choice but to comply, thereby increasing their expenses in the process.
Manufacturing is operating at a third of its capacity, the lowest since Independence, mining has lost 40,000 skilled employees in the last ten years, nurses cannot make it to work, and the education and health infrastructure has all but crumbled. In the midst of all this, the minister of mis-information, the comical Sikhanyiso Ndlovu, tells Zimbabweans that the economy has never been better because nobody could have managed this economy better than Robert Mugabe.
Robert Mugabe has a habit of issuing decrees before jetting off to an admittedly increasingly smaller number of exotic destinations available to him. It was hoped the acting Vice President would see reason and mitigate the effects of a heroes acre-induced decree. Alas, it was not to be. The Vice President simply declared: comply or close shop. We do not give a damn.
That is Zanu-PF logic for you. Even more baffling, is the International logic that Robert Mugabe should be invited to summits where he can pontificate about capital.
Visit the Sokwanele website here.