According to Agriculture Minister Anxious Masuka Zimbabwe will soon suspend wheat and flour imports as the country will become self-sufficient in terms of domestic wheat requirements. In a wide-ranging interview, the minister also claimed that he expected the price of bread will soon fall as the government had ordered the GMB to reduce the price of wheat to millers by about 4.4 % from the current US680 to US$650 per metric tonne. This price would be payable in a ratio of 67:33 ZWL: USD ratio.
The price also takes into consideration macroeconomic fundamentals and the likely impact of the floor price on the exchange rate, and the price of commodities such as flour and bread.
With the bumper harvest that has a surplus to our local requirement, it means we are going to export some of our soft wheat in return for the 30 percent hard wheat, which is a smart way of doing business because we will not need foreign currency to import.
What this means is, once we have enough flour at a reduced price as tabled by the Government, the flour price and bread price will eventually drop.Agriculture Minister Anxious Masuka
Take it all with a grain of salt
Zimbabwean state media has a habit of parroting whatever government officials say without bothering to ask hard questions. Just because a minister said something does not mean that it’s true. Ministers are politicians and ministers have an incentive to lie. Especially when we have elections in a few months.
First of all, it’s not clear why the minister thinks the price of bread will fall only making vague mention of the “macro-economic” fundamentals in a way that seems to suggest this speech was written for him and he has no good idea of what he is talking about. He is probably referring to the current prevailing liquidity crisis brewed by the government in a bid to put a lid on inflation.
While the latest data shows that inflation fell to 3.5% from 12.40% this essentially means that prices are rising albeit at a slower rate. You could therefore be based on this expect prices of bread to actually go up, albeit at slower rates than before. There are actually economic reasons to expect this is what will happen:
- Even if wheat prices fall, wheat is just one of the main inputs required in the bread-making process.
- There are wages of the workers involved in the process, there has been a general lag in terms of wage reviews which have lagged behind inflation. Most workers are yet to have their wages reviewed and when they do these will be factored into the cost of brad
- Powercuts have forced manufacturers to rely on expensive backup power. The increased cost will be passed onto the cost of bread.
- Even when there are no power cuts, ZESA has been reviewing its tariffs upwards more in line with rate changes and inflation and so you can expect these will be passed onto the bread-buying customer too.
- Even though the parallel rates have stabilised somewhat, official rates which actually impact the cost of bread are actually rising as the ZWL officially loses value. In fact, rising parallel rates made it cheaper to buy the government as one could change their USD on the black market and get ZWL at a better rate which you could then use to pay the government. Now the official and parallel rates are closer together.
Conclusion: it is hard to see the Minister’s predictions coming to pass given all this.
Then there is the issue of not importing wheat and flour. While that sounds like good news, the people who make the actual bread have consistently said the super-white loaves that Zimbabweans eat by the millions cannot be made using Zimbabwean wheat because it cannot be grown under Zimbabwe’s climatic conditions. I am hardly an expert on this but it seems more sensible to listen to the baker here rather than the politicians.
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