At the end of the very first press briefing held by Mthuli, Mangudya and Finance Permanent Secretary George Guvamatanga on October 3, 2018, the trio heralded the shift. We just didn’t know what it meant then, for our pockets.
“What you probably do not realise is that we are laying the basis for market-determined pricing,” Guvamatanga said. Few took real notice.
The Transitional Stabilisation Programme (TSP), which will anchor government’s economic policy through to 2020, flags the intention to roll back subsidies.
“Programme initiatives to drive sectoral growth in the productive sectors of agriculture, mining, and manufacturing will be underpinned by market driven policies towards support for value addition and beneficiation, reducing the need for predominantly subsidy oriented interventions,” the TSP says.
In his 2019 budget, Mthuli proposed potentially far-reaching changes to the agricultural commodity market. Subsidies that have kept bread and maize prices steady would eventually be removed.
Where government previously used to purchase grain from farmers at a price above the import parity price and selling to millers at a discount in order to subsidise the staple, a commodity exchange would be established to offer farmers competitive prices.
The Grain Marketing Board would only participate in this market to secure the 500 000 tonne strategic grain reserves.
Government seems to have deemed this to be too much change too soon, as it has recently announced the GMB will continue to subsidise maize.
“The whole objective is for Government to gradually withdraw from actively participating in marketing of crops, paving way for market forces to reduce distortions and fiscal burden,” Ncube said in his 2019 budget statement.
“Current prices depict distortionary elements with large differences between local producer and import parity prices, giving rise to subsidies.”
Without subsidies, consumers will have to pay the full market price for basics.
For now, government seems determined to stay the course. It has also, thus far, resisted the temptation to impose price controls. It hopes that, after a period of turbulence and pain, its market-based reforms will pay off.
According to the script, restoring an orthodox foreign exchange market and a market mechanism for price discovery, will bring back confidence in the economy. In turn, investment – both foreign and domestic – will increase, restore production, expand the economy, create jobs and reduce poverty.
Poor consumers, in the meantime, have to face the market-forces that many campaigned for.- NewZwire
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