Vice President Dr Constantino Chiwenga has said the resurgent price madness being experienced in the market is unjustified given the prevailing stable economic fundamentals and the supportive fiscal and monetary policy interventions meant to cushion the economy from external shocks.
While acknowledging the adverse impact of the Covid-19 pandemic and the Russia-Ukraine conflict, which have resulted in disruption of global supply chains and subsequent commodity price increases, VP Chiwenga said the situation in Zimbabwe was being exacerbated by speculative market indiscipline and unethical business practices.
Reacting to a consumer outcry following the recent spate of basic commodity price increases which have resulted in a 9,2 percent jump in inflation to 15,5 percent in April 2020 alone, VP Chiwenga, who was guest of honour at the Zimbabwe International Trade Fair (ZITF) International Business Conference in Bulawayo yesterday, said Government has moved in to restore sanity by tackling speculative market behaviour, which was fuelling exchange rate distortions.
The situation has prompted the Reserve Bank of Zimbabwe (RBZ) to launch a blitz on illegal money transfer agents, as well increasing lending rates to try and manage money supply, among other measures.
This comes as the official exchange rate is trailing behind at US$1:$159 at the auction system while parallel market rates are pegged at 1:300 and above in favour of the greenback.
Despite benefiting from the auction system, most businesses tend to index prices on the parallel market rate citing delays in disbursement of auction funds.
“The Reserve Bank of Zimbabwe has moved to curtail resurgent price increases in the economy and stabilise the volatile parallel market exchange rate, through increasing interest rates and further cutting down the quarterly target for money supply growth,” said Dr Chiwenga.
“These measures demonstrate Government’s desire to stem further price increases, whose primary driver is speculative borrowing, leading to the depreciation of the local currency and fuelling price hikes.
“Similarly, I want to implore the business community to complement Government efforts by practicing ethical business ethos and desist from unjustified price increases.”
Given the backdrop of disruptions caused by the Covid-19 pandemic and the on-going Russia-Ukraine conflict, which has secondary pass-through-effects on domestic and international prices, the Vice President stressed the need for Zimbabwe to innovate, re-think and re-invent its business strategies.
“For this reason, we are calling on our private sector to join hands with Government on the development and domestication of value chains, as an essential tool for the transformation of our economy, as espoused in the National Development Strategy 1,” he said.
“The priority is on moving the economy up the value chain and structural transformation, underpinned by the strengthening of already existing and development of new value chains.”
Dr Chiwenga paid tribute to the country’s private sector for their efforts towards reviving local industry, after years of industrial stagnation. He reiterated that the achievement of Vision 2030 hinges on successful re-industrialisation, driven by re-tooling and innovation to promote competitiveness of our products in both regional and international markets.
“This will be primarily hinged on increased value addition and accelerated value chain activity, particularly in the agricultural sector,” said Dr Chiwenga.
“Special focus is on soya bean, fertiliser, cotton, sugar cane, dairy, and leather value chains. We are also focusing on other sectors, such as pharmaceutical, motor vehicle assembly, iron and steel, general engineering, mining and plastic waste recycling value chains.”
VP Chiwenga also stated that the Government, through the Ministry of Industry and Commerce, has already started engagement with the relevant stakeholders to promote the strengthening of the prioritised value chains, starting with the dairy, leather, pharmaceutical, iron and steel and cotton-to-clothing.
He said the Ministry has also produced sector-specific value chain strategies, such as the Leather and Pharmaceutical Strategies, that inform the potential investor of the business and investment opportunities presented in these sectors.
“As a result of this initiative, our manufacturing sector is now poised to grow by 5,5 percent this year,” said Dr Chiwenga. “In addition, Government, through the US$12 billion Mining Sector Strategy, is deepening efforts to strengthen the linkages between the manufacturing and mining sectors to enhance value addition and beneficiation of minerals.”
Zimbabwe produces a broad spectrum of minerals and mineral products, dominated by gold, platinum, diamonds, nickel, chrome and coal. Lithium is also expected to contribute significantly to the growth of the sector.
“There is, thus, great potential for value addition by industry. As a country, we should not miss this opportunity, but take full advantage of the rising prices of mineral commodities to increase our exports value,” he said.
Already, Zimbabwe has recorded an impressive 37,3 percent increase in the country’s exports in 2021, rising from US$4,39 billion in 2020 to about US$6 billion.
“This bears testimony to the positive response under the Second Republic’s engagement and re-engagement drive,” said Dr Chiwenga.
In order to ensure dedicated availability of electricity for industry, VP Chiwenga said Zimbabwe was driving towards energy self-sufficiency by narrowing the demand-supply gap, minimising power imports and conserving foreign currency.
This will be achieved through speeding up the completion of the refurbishment of the US$1.4 billion Hwange Units 7 and 8 project, which is about 80 percent complete and whose completion will ensure an additional 600MW to the national grid.
“This will go a long way in contributing to national economic recovery. In line with the thrust on sustainability in the generation of electricity, Zimbabwe expects 100MW to be added to the national grid from renewable energy projects,” said the Vice President.