In a report published by the Herald as breaking news yesterday, the 5th of June, the Grain Millers Association of Zimbabwe had started deploying the price monitoring teams that were promised when they signed a self-regulating agreement with the Confederation of Zimbabwe Retailers. This agreement was created to monitor retailers of basic commodities to assure that they were being sold at recommended retail prices.
This is one of those ideas we hoped was going end in talk and never see the light of day but unfortunately it has come to pass. I am not against the idea of lower prices, I chase them every day. My scepticism stems from how poorly this plan has been thought out.
Why price controls don’t work
Price controls which attempt to put a price ceiling on goods and services don’t work when the market is fragmented and has multiple players. While the Confederation of Zimbabwe retailers may have a large membership it is impossible to guarantee all members will adhere to price controls. Furthermore how far does the membership of the Confederation of Zimbabwe Retailer’s membership go? Where does the general dealer who buys from Jumbo wholesaler fall under this agreement? Are all retailers CZI members and do they all have a relationship with GMAZ? Many will say this is not a price control but rather monitoring, which brings to my next point.
Why price monitoring is no better
In order to effectively monitor prices, the organization would need to have monitors stationed everywhere, all the time. This is simply not possible. With price monitors walking around in bright coloured vests it is very easy to deceive them as many retailers in Zimbabwe have abandoned pricing goods. Zimbabwe law also allows for the invitation to treat pricing – so long as the good is not available to pick on a shop shelf where the price is displayed. Invitation to treat simple terms means I can advertise a price which I can refuse and request a higher price for the item in my tuckshop, for example.
A lesson from history
The other concern with this is that it’s been done before. Memories of 2008 where retailers and distributors would receive price-controlled goods and sell them on the parallel market that had emerged because of price controls. These goods were sold off premises while a small fraction of their entire allocation was sold in the shop. The income from the parallel market sales would be underreported as though the sales had been made in the shop at the controlled price.
Perhaps this a public relations exercise gone too far but this is certainly not the solution to our price problems. Price increases are but a symptom of a larger ailment that has gripped the economy of Zimbabwe. While managing the symptoms seems easier, it ultimately leaves us in a worse off position than the initial problem we sought to deal with.