June 28, 2007

Zimbabwe to cut prices 'by half' / Government wants 51% stakes in companies

Government has directed manufacturers, retailers and wholesalers to reduce prices of basic commodities, including transport and newspapers, by up to 50 percent with immediate effect, according to the state media. Economic analysts believe the futile effort by the government to rein in runaway inflation might lead to shortages as loss-making manufacturers stop or scale down production. Among some of the products whose prices have been halved are bread, reduced from Z$45 000 to Z$22 000, 10kg refined maize meal from Z$130 000 to Z$85 000. 2kg white sugar which had gone up to Z$70 000 comes down to Z$33 940 and Mazoe orange crush from $600 000 to $120 000. The price of fuel, which had reached an all time high of $180 000 per litre, was slashed to $60 000.
Industry and International Trade minister Obert Mpofu has informed that the business sector should revert to the prices by June 18th, while its justifications for increases are being looked into by the national incomes and pricing commission.
In the meantime, government has tabled a bill that seeks to transfer majority control of “public companies and any other business” to black Zimbabweans. Parliament is expected to approve the Indigenisation and Economic Empowerment Bill, which stipulates that no company restructuring, merger or acquisition would be approved unless 51% of the business went to indigenous Zimbabweans. “For a start, it’s not very clear how they are going to implement this, but going by their record it could be another chaotic and disastrous exercise,” said leading Zimbabwean economic consultant John Robertson. “Those (companies) already here are likely to hold back on any expansion programmes, while possible new foreign investors are likely to also hold back to watch how this is going to work.” The empowerment bill defines indigenous Zimbabweans as any person who was disadvantaged by unfair discrimination on the grounds of race before independence in 1980. Before, Mines Minister Amos Midzi has already announced that Zimbabwe was to take control of strategic resource sectors such as uranium, but in other sectors local businesses would take majority stakes. He said special consideration might be given to companies already operating in the country, such as international miners Impala Platinum and Rio Tinto.
Political analysts said the proposed bill would give Mugabe an opportunity to enrich his supporters and consolidate his ranks ahead of general elections next year. Although the likely exemption of major mining companies from the programme would leave only a few big foreign firms in danger, Mugabe could still use the programme as a political weapon, they said. “I think it’s fair to expect that the first targets here will be those companies that the government has been accusing of sabotaging the economy, of raising prices unreasonably, of cutting production,” said Eldred Masunungure, a political science professor at the University of Zimbabwe in Harare. (Rts)

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