We are on record for often marvelling at the price differences between Zimbabwean goods and South African goods. To set the record straight we only marvel when the price difference is so large, for example, when local supermarkets started selling Surf at 300% more than the price of MAQ which is from Sout Africa.
Now that doesn’t make sense. How can a product that is made in South African products be cheaper than local products after transport costs and import duty?
It makes perfect sense however that goods are cheapear in South Africa, than in Zimbabwe. This is despite the fact that the Rand and Zimbabwean dollar are official at par. What is ridiculous is that state media thinks this doesn’t make sense.
Here are the reasons why this makes sense
- ZESA powercuts mean businesses have to rely on back up power, which means gallons and gallons of fuel just to keep that meat and those perishables fresh. It means industries are sometimes relying on very expensive backup power. In fact, one could argue it is ZESA that’s providing back up power.
- A lot of components and ingredients require foreign currency which is in short supply.
- Many of these components actually come from South Africa
- If we are not importing components we are importing the goods we sell. The goods on most shelves are from South Africa. This means they paid duty and transport costs from South Africa. How then can one then expect them to be sold at anything closely resembling South African prices?
- Idle time has to be paid for. Due to shortages businesses end up paying for idle time. Workers in queues are not working and yet have to be paid for that time. There are queues for everything and businesses are not spared.
- There is a risk premium to using the Zimbabwean dollar which is on a nosedive. You have to charge an extra 20-25% because you never know what is going to go up or what nasty surprise the government has planned.
- Policy inconsistencies by the government causing jitters in the economy and spawning speculative behaviour.
- Economies of scale-South African industries tend to be larger than the Zimbabwean industry due to them serving a larger market. This allows them to enjoy economies of large scale operations
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