Thursday, April 25, 2019

VP threatens business over price increases

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VICE President Constantino Chiwenga yesterday issued a chilling warning to businesses that are wantonly increasing prices of basic commodities.

Chiwenga's warning comes days after President Emmerson Mnangagwa also cautioned businesses that government may be forced to regulate prices amid the unjustified price hikes.

This comes at a time when there are growing fears that the country's fast deteriorating economic situation, marked by shocking price hikes and severe shortages of foreign currency, fuel and vital medicines could trigger social and political unrest.

 Addressing delegates at the 13th International Business Conference (IBC) at the ongoing Zimbabwe International Trade Fair (ZITF), Chiwenga said the development is reversing the objectives of the interbank foreign currency market introduced by the Reserve Bank of Zimbabwe in February.

Chiwenga said this was so because there were people feeding the parallel market.

"I want to give a stern warning to those practicing financial terrorism in the country. We will react accordingly as Government and nobody should claim that they were not warned. We'll take very strict measures," said Dr Chiwenga.

He said the parallel market continued to overshadow the formal market because there were buyers and sellers who were willing to participate in its activities.

"As responsible and patriotic citizens, we should ask ourselves whether our actions are in the best long term interests of the nation?"

The Vice President said it was disappointing that some businesses were financing the black market at a time when the Government was making efforts to create a sustainable economic environment.

"The market-based framework for the determination of the exchange rate is expected to facilitate financial sector stability, contain inflationary pressures and build public confidence.

"These objectives will not be attained if individuals and corporates continue to sustain the parallel market through their underground activities," said Dr Chiwenga. He said Government will continue fighting the practice and assured the nation that what Government is doing will work.

"What we're doing will work and what the financial terrorists are doing won't work," said Chiwenga. He also condemned the continued spate of price increases of basic commodities, saying it was unjustified and was driven by sheer speculation. "The rising inflation, which we're now experiencing hurts the whole economy and its development prospects.The trend is as a result negatively affecting all of us. It's now time we engage and openly discuss why as a nation we continue to experience foreign currency shortages yet our foreign currency earnings exceed those of other countries that are not experiencing the same phenomenon," said Chiwenga. He said Government was committed to engaging its stakeholders to find lasting solutions to the challenges the country is facing. Chiwenga also noted that the manufacturing sector's capacity utilisation levels had dropped over the years from 70 percent in the 1990s to the current average of 40 percent due to a myriad of challenges including corruption, lack of access to credit lines, ageing technology and foreign currency shortages. To that end, he said, the Zimbabwe National Industrial Development policy seeks to arrest this downturn and thrust the country onto a firm base for self sustaining development.

Chiwenga said to achieve this, Government was forging strong partnerships with the private sector.

"This will assist the Government to collectively implement effective strategies that are essential for boosting production in the economy," he said.

The Vice President said Government will put in place an enabling infrastructure to anchor industrialisation, technological advancement and appropriate skills development.

These measures are envisaged to enable the private sector to take advantage of the market opportunities that will arise from trade liberalisation as well as those already existing in domestic and regional value chains. Chiwenga said through the Transitional Stabilisation Programme (TSP), Government was implementing critical structural reforms necessary for economic turnaround. "Some of the reforms will no doubt be painful but are unavoidable because without them our economic fortunes can only become worse. Successful turnaround to improve the living standards of our people requires that we remove existing market distortions, which undermine consumer welfare through rampant arbitrage," he said.

The VP expressed concern at the pace at which the ease of doing business reforms were being implemented saying the implementation was not as fast as desired. He however said Government was sharpening its machinery to weed out bureaucratic bottlenecks that slow down investment.

"Bureaucratic red tape and high costs of doing business continue to render Zimbabwe an unattractive investment destination, especially to those investors whose investment location decisions are motivated by a desire to reduce production and operating costs.

"To address these shortcomings and improve competitiveness, the Government will expedite the ease and cost of doing business reforms," said Chiwenga.