An unintended consequence of the price controls imposed by the Zimbabwe government is unity and increased cooperation in the family.
While killing time at a sports bar with friends, you might get an exultant call from your wife to say that sugar is available at a certain shop. As the supermarket won’t sell more than one item to a consumer, you have to leave your friends to join your wife and your two sons in the queue so that you can get as many products as possible.
In the queue your sons might ask for help with algebra and, when you are done with homework, you might spend time whispering sweet nothings to your wife.
This has all come about because of the price controls policy the government implemented recently to deal with the runaway prices of basic commodities. Most products are no longer available in the shops now, but have begun appearing on the black market — which locals call the parallel market — where they are sold at much higher prices than their true value.
As a result Abdoulaye Bio Tchane, the International Monetary Fund’s (IMF) Africa department director, said recently: “If monthly trends continue, staff project that year-on-year inflation could well exceed 100 000% by year-end.”
As if responding to this, the Reserve Bank of Zimbabwe introduced a new Z$200 000 (about R7) note on August 1.
“Price controls that are being enforced are likely to exacerbate shortages and ultimately fuel further inflation,” he said.
Economic analyst John Robertson said inflation topping the 100 000% figure “is possible”. He said government’s attempt to suppress inflation without addressing economic fundamentals will reflect in the black market where its tentacles do not reach.
If inflation gets to these levels, the Zimbabwean dollar will become valueless and Zimbabwean employees won’t want them, he said. “Many people will demand to be paid in foreign exchange for goods and services,” Robertson said, adding that “this increased valuelessness of the local currency will become a major political embarrassment to the government.”
To rectify this, Robertson said, “there is little that the government can do and even less that they are prepared to do”.
As a short-term measure the government might print more money to pacify restive public servants. But the effect of this will be more money on the market chasing too few products, further pushing up prices, he said.
Another economist with a local bank, who refused to be named, said the figure punted by the IMF would reflect what will happen on the black market. This will “worsen already difficult circumstances” for the consumer.
He said, in real terms, there won’t be much of a difference between an inflation rate of 40 000% and 70 000% because at that level figures are largely symbolic; all show a hyper-inflationary environment.
The Central Statistical Office, the official source of these figures, no longer releases inflation data.
A consumer watchdog, the Consumer Council of Zimbabwe, now issues inflation figures. Its most recent published figures showed inflation figures for June at about 13 000%.