eBusiness Weekly
With strong stability in exchange rates, perhaps too strong considering the general fall in the value of the rand since the end of last month, consumer attention will now be looking at other concerns, and the authorities appear to be following suit.
The first priority of almost all consumers remains seeing honesty in pricing and manufacturers and retailers who cannot follow the official exchange rates and who choose their own private rates or shove up the price in US dollars to push up the local currency price as well to a level they want are now being marked by consumers, and are likely to suffer accordingly.
Price changes are now likely to require a lot more explanation. One particular problem is that Zimbabwean businesses and consumers tend to price in US dollars when they look at foreign currency equivalents, while most of what we think of as supermarket goods have their imported content, either as imported raw materials or the actual final product, coming from South Africa.
The exchange rate between the rand and the US dollar is far from stable and can easily vary by 10 percent during a month.
During July, for example, the rand strengthened in value, but this month it has fallen in value, sufficiently far that it now needs around R!9,1 to buy a US dollar, a fairly big drop from the R17 that many were using just three weeks ago when doing rough and ready pricing in multiple currencies.
This fall in the rand value should make imported South African goods cheaper in US dollar terms, although there will be complications of rising rand prices but those tend to be delayed.
Even when we look at the local currency exchange rate with the rand this month there is a falling rand value, despite the fact that over the last couple of weeks the Zimbabwe dollar has edged down a little against the US dollar, but not as much as the rand has edged down.
Unless we are fairly careful we could start running into the sort of problems we faced when Zimbabwe dollarized, that is a falling rand against the US dollar made South African goods ever cheaper and Zimbabwean manufacturers found they simply could not compete effectively.
Even at that time there were suggestions from industrialists that Zimbabwe should have chosen the rand if it was going to use a foreign currency as the local currency.
These days the problem would possibly be soluble if the Zimbabwean banking system at least kept an eye on the rand exchange rate when it was bidding for wholesale US dollars, or setting its daily exchange rates that are then averaged out for the interbank or official exchange rate.
The US dollar rate for imported goods is just a rough and ready guide and a lot depends on the source of the imports, with trade growing between Zimbabwe and China and India for example, and those will be affected by the exchange rates of those two currencies against both the US dollar and the local currency.
A lot of problems could be avoided by using the local currency as the unit of account in pricing formulas in Zimbabwe, but there probably has to be a prolonged period of reasonable stability before most manufacturers would feel happy doing that. But it is something to keep in mind.
In other areas consumers now expect more from their Zimbabwean manufacturers and suppliers, with the ranges of goods rising and new brands continually entering the market. This widening of choice benefits consumers as it increases competition and at least some of the new products come from manufacturers who are not connected to the traditional brands.
One interesting source of new consumer products are Bulawayo factories and businesses, and the fact that what used to be Zimbabwe’s industrial heartland is now opening new businesses suggests that it is rising from a near-death experience. Again this can only benefit competition by opening choices and will make careful costing and pricing more necessary.
A monopoly or a close group of established suppliers can be inefficient but once you get a reasonable flood of outsiders and newcomers moving in then pricing calculations start becoming fundamental.
Brand loyalty may be stronger than pure reason would suggest, but there are probably limits.
Economists assume that everyone will buy the cheapest product that meets their quality expectations, but then have to factor in the price of a good brand.
This is why businesses can sell established brands, although the buyer could easily just start making something almost identical without having to pay that extra cost.
The burst of high inflation in the second quarter in Zimbabwe will have seen more consumers following wallet loyalty rather than brand loyalty, and at least trying new products, and it is quite likely that some newer manufacturers may have become more established as their products move into the market.
In this regard more manufacturers and retailers need to take into account the consumer regulations, most of which have been around for a long time although ignored for the same length of time.
But there was a change with the new Consumer Protection Act setting up the Consumer Protection Commission, and this is now active making inspections, with more than 1000 retailers checked out in the last two weeks, and finding 180 retailers were definitely breaking at least one regulation and 48 others needing to become more compliant.
A fail rate of 20 percent seems excessive, and it appears that many in business now need to think through how they run their businesses.
Here the business associations, as well as the commission, probably need to help many in business with the basic list of what they need to do, and publicise the most common errors.
This is not just people being officious. Consumers are also becoming more aware of their rights and that will reflect ever more on where they spend their money.
The retail trade is highly competitive and a badly treated customer will quickly become someone else’s customer.
So making sure that customers are treated properly and legally, as well as politely, seems a good business move.
The by product is that it also keeps you out of trouble with the authorities, but the main motivation must remain the boost it gives to customers.
Zimbabwe’s laws are hardly the tightest in the world and we are far from being anti-business. But the sort of problem the commission found, products for example not properly labelled and a tendency not to want to deal with consumer complaints, are fairly serious.
We are now getting a lot of smaller businesses and home businesses coming into operation and making a selling new products.
This is good, and there are likely to be more as farming families join in and rural communities set up simple manufacturing.
But there are some rules that make sense. Proper labelling is one. This mainly concentrates on a list of the ingredients, in the order they form the product, a proper physical address and a telephone number for more information and complaints.
That allows any consumer to examine the label and see if there is something they cannot eat because they are diabetic or have allergies or the like.
This is why proper labelling is now compulsory just about everywhere around the world, a far cry from say 50 years ago, or even more recently, when manufacturers saw everything they made a big secret.
These days it is the process, not the contents, that are secret although flavourings can be described as “flavourings” or “spices”.
Labels can be designed and printed on a computer and laser printer and even the smallest town will have someone who does that for their business, so there is no excuse. Cheap modern glues work remarkably well in attaching a label to a container.
The other half of being pro-consumer is dealing with consumers, hearing out their complaints and hopefully receiving their praises. But whichever is coming in the secret is contact and communication, and the minimum here is entrenched in law.
