eBusiness Weekly
Economic planners, procurement managers and others responsible for working out how efficient supply chains need to operate in Zimbabwe must be working overtime at the moment trying to calculate the various factors that lead to temporary shortages and stock-outs, even when the sums suggest that this should not happen.
There are many factors to consider and not all are obvious and some involve a change in buying culture.
At the top of most hit lists are the scalpers, those who when a product is in short supply, or even when many consumers think it might be in short supply, try to snap up most of what is available, create a corner and then resell the goods at huge profits.
Then there are the hoarders, people who are not evil but who are terrified that in the near future the goods they want will have seen dramatic price rises, or have become unobtainable, and buy far more than their immediate needs.
They are not re-selling but are moving a lot of the stock that should be in storerooms and warehouses into their pantries. There are limits to this behaviour, simply because many people do not have vast sums in unused money, and as we have all heard about someone with stocks of a dozen bottles of cooking oil, 20 bags of sugar, 40 litres of fuel in cans, but no money to buy lunch, in the end these stocks will be consumed.
And finally there are the prudent types. The fuel business at the moment is a good example of this group. Many drivers used to wait for their gauge to show a quarter full, or even less if it was just a couple of days to payday, before looking for a service station. Now they twitch when their gauge hits three-quarters full. They are not using more fuel; they have no cans in the carport; they are not hoarding. But instead of topping up once a week they top up three times a week, or instead of twice a month they now queue once a week. The upshot is that demand does not rise but there are several times more fuel sales than before and instead of a row of five garages all with fuel most of the time, each sells out within hours of a delivery; and that drives the nervousness and the culture change.
The same prudent people might have waited until their bottle of cooking oil was a quarter full before buying a new bottle. Now they like one full one as well as the one in use. It is the same with soap, packs of flour (which have a limited shelf life) and other essential goods. The old joke about what to buy before the hoarders move in is now a little less funny.
The scalpers and the hoarders are being fought by responsible retailers, those who limit quantities that can be bought by each customer. That has helped to reduce panic buying. At the same time supply chains are normalising, with good deliveries of cooking oil in the last few days for example, and that coupled with responsible retailing has made most people shun the scalpers and the profiteers because they know they can buy the stuff tomorrow at the normal price. Hoarders are also figuring out the costs of their bulk buying and present lack of cash. So there is just the modest blip of the prudent but that should result in normal sales over a month, if not this week.
But all these factors have to be thought through when looking for solutions.
In addition we have strange panic reports. For example there is a bit of video floating around showing a group mobbing a bread truck. The numbers seem small though. If it is normal retailing of two loaves a customer then there is obviously more than enough. Only when we think quantitatively do we suddenly realise that the group are probably scalpers trying to grab a few dozen loaves each to sell at a handsome profit to evening travellers. The trouble is that too few people do the sums before they panic.
One way of killing scalpers is to flood a market, and bankrupt those with high-priced stock for resale. It has been suggested that the Government could have eased the flour shortage that is about to end by allowing those with free funds to import a limited and carefully calculated tonnage of flour. This imported flour would be more expensive than local flour and would not be wanted by bread makers, who see materials as their most expensive input, but might interest say cake makers. The amount of flour in a $1 loaf and a $10 cake is about the same, but the biggest input in a cake is the confectioner’s skill, and the other materials cost more than the flour. In any case the import would put a maximum on the black market price, which would be well below what some are trying to charge at 7pm.
The final way of smashing scalpers and hoarders of food is of course to grow more. Zimbabwe now grows around a quarter of its wheat by some estimates, although growing demand suggests that this is a bit less. That is a vast improvement on recent years, but certainly suggests that there is more potential, especially as world wheat prices are rising and so we could pay our farmers more. Soyabean production has been ridiculously low in recent years. Yet it would be easy for Zimbabwe to be an exporter. There as a time when some farmers had complex rotational systems, with soyabean fed into the cycle as a nitrogen fixer as well as a crop, keeping overall costs down but profits up. Redeveloping these systems seems urgent.
Command agriculture has made a huge difference in the last couple of years, such as ending Zimbabwean maize imports. Now it needs to get smarter to ensure that not only is the crop range widened but that Zimbabwean farmers are trained to be smarter, so that they make their inputs work a bit harder.
