Pricing madness in Zimbabwe

The Zimbabwean market is riddled by Non-Performing Loans which have weighed down the performance of many credit facilities providing institutions be it in the financial sector, retailing in clothing furniture or electrical products the situation has been the same and it’s worrying. The country is currently under a strain of problems which among them involves liquidity problems and shutting down of companies on a monthly basis thereby having a largely informalised economy. Business is currently on a low and most institutions had devised ways on trying to be viable and thus had credit facilities for their clients who were likely to attract businesses but in turn they have exposed these institutions to default risk. In spite of the risk companies have continued to offer these services but at times the pricing of these products or facilities has deterred clients from making use of the facilities and opting to buy from South Africa or Botswana where goods are cheaper.

 The imports are indeed cheaper and at times they are of better quality than the products that will be available here at home. The buying of imports has drained the country of the much needed funds to resuscitate the business sector as a whole. The problem especially for the retailing outlets is their pricing model which is not in any way competitive enough to sway importing locals to them. Players in the Furniture and Electrical products sector face a lot of competition from imports even though they have credit facilities but they are not priced in an attractive manner with longer payment periods. ZIMRA has tried on the other hand to help our industries and companies by levying high customs duty for all imports but this has not stopped locals from buying imports as they still view them as cheaper compared to local products.

Below is the calculation table for three products which are available both in Zimbabwe and South Africa and we will compare.

Pricing schedules for both Zimbabwe and South Africa
Product	Zimbabwe	South Africa
55 Inch Sony LCD TV:	Cash Price: $3,999.00	Cash Price: R18,411.00
	On Hire Purchase:	Exchange rate: 10.7485
	Deposit: $1,200.00 with instalments of $351 for 12 months	Transport cost: $100
	Total cost on Hire Purchase: $4,980.00	Customs duty @55%: R10,126.05
	Interest rate: 24.53% per annum	Total cost in dollar terms: $2,754.98
Avante Lounge Suit	Cash Price: $5,699.00	Cash Price: R36,799.00
	On Hire Purchase:	Exchange rate: 10.7485
	Deposit: $1,710.00 with instalments of $398 for 18 months	Transport cost: $100
	Total cost on Hire Purchase: $8,874.00	Customs duty @55%: R20239.45
	Interest rate: 37.14% per annum	Total cost in dollar terms: $5,404.78
Samsung RSA1WTMGI/XFA Refridgerator	Cash Price: $2,499.00	Cash Price: R12,000.00
	On Hire Purchase:	Exchange rate: 10.7485
	Deposit: $750.00 with instalments of $219 for 12 months	Transport cost: $100
	Total cost on Hire Purchase: $3,378.00	Customs duty @75%: R9,000.00
	Interest rate: 35.14% per annum	Total cost in dollar terms: $2,053.76

The above extract shows the differences between the Zimbabwe prices and South African prices and for Zimbabwe we used prices from TV Sales and Hire which is one of the cheapest in the market in terms of pricing. The above is just a glimpse of how our pricing models are affecting demand and with customers having become cost sensitive coupled with the economic downturn that is taking place, companies should brace themselves for two things, high default rate and low demand.

Many points might be thrown across regarding the pricing models in Zimbabwe which may be high cost of raw materials, high lending costs from local banks, and policy inconsistencies which have made planning be that of day to day rather than a year or longer term. Companies should review their pricing with an eye on the foreign markets so as to stay in business and be competitive rather than going for a kill which will have a negative impact on the firm in the end. Alternative means should be put in place innovativeness should be the number one aspect of all companies in Zimbabwe for them to provide quality goods and services at a low cost. We have seen a growing or widening import to export gap recently as locals keep pushing up demand for imported goods which in turn is leading to closure of most industries as they cannot match regional prices of commodities.

For the country to reduce the widening gap of imports to exports, companies must realign their pricing policies, introduce new machinery which is cost effective in production so as to lower costs and also try to be involved in the production of raw materials whether directly or indirectly so as to reduce costs on these materials.