Beyond Crude Oil: Minister Nzenza Is Both Right And Wrong

Unless you have been living in a bubble you would have noticed the recent upward trends in the prices of basic staples like cooking oil, mealie-meal and other similar basic commodities. Naturally, people were concerned and demanded answers from the government and so the Minister of Industry and Commerce went on our sole TV station to explain. Her somewhat, rambling explanation has been the subject of much ridicule and confusion on social media.

Quite clearly there are three items that have gone up but they have not gone up insignificantly [sic]. For example, cooking oil has gone up a little and also roller meal. The reason why cooking oil has gone up is we have tracked that it’s caused by the rise in prices on the international market .. on the price of crude oil and we are importing that crude oil and that requires foreign currency and as a result, there is an impact on the price of cooking oil.

Honourable Nzenza’s remarks on the issue of prices going up.

Communication 101 avoid ambiguity

The crude oil remark touched a storm as social media mocked the minister. How could she suggest that cooking oil is made from crude oil a term that is almost exclusively used to refer to unrefined petroleum? You only need to Google crude oil to understand why people were baffled by this. Obsequious pro-government individuals were quick to come to her defence, she was referring to crude soya oil extract they said. They then went on to laugh at all those people who misunderstood the minister’s remarks.

The truth is the minister is at fault. She failed to observe a key principle of communication although her mistake is very understandable. They probably internally refer to this as crude oil just as they do at ZIMRA when classifying the product. However when communicating it is always important to avoid ambiguous terms. That is communication 101. This is made even more poignant by the fact that she went on to use an internal reference that is used differently by the wider public. She is communicating with people from all walks of life the least she could is use general understandable terms otherwise why waste time communicating in a language the rest of us don’t understand?

She could have simply said the raw materials we use have gone up on the international market. Simple and effective. We all know this country is hooked on imports. We import needles and razor blades no one would be shocked to learn that we import most of our cooking oil raw materials. In fact those who pay attention to government communications already know that past cooking oil shortages were a result of us not having foreign currency to give to companies like Wilmar so they can import these raw materials.

As already said the mistake is understandable. The minister had probably just been briefed and ended up not doing the necessary code switching. But make no mistake, the public is not at fault-she is. Let us not have a culture where authorities are afraid or unwilling to say oops, I made an error there I was referring to the raw material we use without making the rest of us feel like idiots for not understanding something that was not clearly communicated.

The merit of her remarks

So people were so hung up on technicalities that they never even bothered to go as far as evaluate the validity of her assertions. We will now proceed to do so:

• She is right the price of soya crude oil has gone up in recent weeks and months. This has no doubt impacted on the price of cooking oil
• The minister is also right we do need foreign currency to make these purchases but the rate has barely moved officially and the impact of shifts in exchange rates alone cannot be used to explain the rise in prices of cooking oil. In fact the price of cooking oil has gone up in USD terms too. 8x2l bottles of Raha used to sell for US$18.50 now they sell for almost US$26. The exchange rate clearly has little to do with this so she is wrong on that front.
• The rise in soya crude oil doesn’t explain the rise in prices of other commodities at all. Soya crude oil is not used to make mealie-meal unless this is one of those other secret facts I am not aware of.

The truth is that there are host of factors that have led to the continued rise in prices of goods. A lot of people are not working so even though the increase in prices might seem insignificant to her these price shifts are pretty devastating to most people. Her colleague Mthuli Ncube has remained mum on issues such as aid as he continues to lie that Zimbabweans are doing OK. If he is not willing to play Santa Claus the least he can do is scrap the 2% tax and improve people’s spending ability.

So why the price increase

The truth is for the longest times Zimbabwe’s problems have been viewed and explained in terms of the exchange rate. We import everything so every problem we have is somehow tied to foreign exchange has been the catch all explanation. Wrong. The exchange rate is but one of many other macro-economic indicators. Just because that has been fixed doesn’t mean other problems have been. The biggest issue will always remain our import exposure. We just import too many things and whenever there are supply side issues we suffer for it.

• We import fuel and the price of fuel has gone up since December, with an increase on 5 January and lately on 5 February. Fuel price increases were in real terms and not surprisingly this led to an all-round price increase.
• Utility companies led by ZESA also adjusted their prices during the last quarter of 2020. These impact on the cost of doing business and led to another feedback loop in price increases.
• The rate has been creeping up officially too and much more so on the black market going from an average of 100 ZWL per dollar to almost 120 ZWL per dollar. There are a lot of entities that still rely on the black market
• The cost of producing and doing business during the COVID-19 pandemic has gone up. Businesses have to test employees regularly, shutdown branches and disinfect, stop production when cases arise, invest in medicine and equipment. Those costs are being passed on to the consumer.
• The pandemic has also not been kind to global supply lines. The lockdown has made everything slow. Coupled with lockdowns this has led to supply-side issues and a decline in overall supply the result is that prices have to go up.
• Just plain greed. Some people see that a sector’s supply chain is vulnerable and pounce, they buy all the items and sell them at eye-watering prices on the black market.

We could go on but the truth is there are so many reasons why prices of basics are going up. Zimbabwe needs to work on it’s import exposure. Produce the low haning fruits like maize, needles and plastic balls to meet local demand and then only import what you need. Otherwise the roller-coaster will continue.