February 4, 2011

Minister criticises businessmen

The Mozambican Minister of Industry and Trade, Armando Inroga, has declared that the Mozambican business class was still unaware that profit came from increasing the number of goods sold, and not simply from hiking their prices. Inroga said that lack of awareness of how real businesses make their money was behind the trend for prices to rise during the festive season, while in other countries businesses often reduce their prices at times of peak demand.

For the 2010 festive season, the government introduced measures that were supposed to stop prices from rising. For example, customs duty on imported foodstuffs was reduced, because it was charged on an artificial "reference price" and not on the real price that importers paid for their goods. In return, the importers were supposed not to exceed the prices earlier agreed with the government. But, by and large, the importers failed to keep to their side of the bargain. The government strategy failed, and Inroga now recognised this fact. The traders appeared to win, because, in some cases, they got away with doubling their prices. The consumers lost, and some of them simply refused to buy goods when they considered that the prices were extortionate - which is why tonnes of potatoes rotted in Maputo markets.

The state also lost out, because it collected much lower customs duties than would otherwise have been the case. "There were difficulties in complying with the government's directives to avoid price increases in the festive season. Private businesses continued to charge high prices", said Inroga. "We wanted sales in December, as happens in other parts of the world".

There was no awareness of the importance of selling large amounts of goods relatively cheaply, he said. Instead, when demand increased the trend was for operators to increase their prices. In December, "when people received their wages, the demand for products rose, and the operators increased their prices", said Inroga. "The following week demand declined, and prices recorded a slight fall. After the festive season, low prices continued. But when the state paid the 13th month (the New Year bonus, equivalent to an extra month's wages, paid this year in the second week of January), prices took off again, and now they're coming down".

According to the National Statistics Institute (INE) in December inflation, measured by the Maputo Consumer Price Index, was 3.48 per cent, the highest monthly rate in three years. This pushed the January-December inflation rate to 16.62 per cent. (AIM)

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