Some stakeholders in the baking industry have held secret consultations over the past week to unilaterally peg the price of a standard loaf of bread to the prevailing black market rate of the United States dollar against the bond note.
The Sunday Mail can reveal that bakers want to start implementing the pricing mechanism this week, raising the cost of bread from $1,10 to $4-$5 as per last week’s black market rates.
However, some in the baking sector are shocked by this as Government meets the bulk of their input requirements, while other key cost drivers – like labour, water and electricity – have remained constant.
The sector is among those getting priority foreign currency allocations from Government, and the Reserve Bank of Zimbabwe has been picking up the tab for wheat imports and facilitating access to fuel for deliveries to millers.
The National Bakers Association of Zimbabwe (NBAZ) has been frantically trying to rope in the Grain Millers Association of Zimbabwe into their scheme without success.
Notwithstanding improved wheat supplies, the bakers are scaling down production as part of the first stage of the price hike plot.
NBAZ president Mr Ngoni Mazango confirmed a hike in bread prices was imminent.
“As an industry, we have a challenge of foreign currency like other industries as well. We are not getting enough (foreign currency) allocations from the Reserve Bank,” he said.
“As a result, the cost of raw materials has gone up. People are asking in either US dollars or some are multiplying using current exchange rates, which have shot up. That poses serious viability challenges to the industry.
“(The price of) flour might have moved slightly from about $31,50 to around $36,50 per 50kg bag, but bread is not made by flour alone. We do not manufacture bread fat here in Zimbabwe; there are also enzymes, spare parts for our plants and even for service vehicles, which are also imported or bought with foreign currency.
“We require between $4 million and $7 million United States dollars each month and we are getting 20 to 30 percent of that.
“We are still consulting (on the price of bread), the problem is we have to cost our bread in US dollars and it is costing us in the range of US$1 to US$1,10 (to produce a lead).
“If we don’t get the forex and you apply the current prevailing parallel market rates, a loaf should be around $4 to $5. But we are saying if the Government can allocate the same money to us the price should come down.”
However, key production costs – fuel, electricity, water and labour – are unchanged.
Last week, Government embarked on a price monitoring system to ensure manufacturers and suppliers of basic commodities revert to a pricing system that recognises the convertibility of bond notes and RTGS balances at a rate of 1:1 with the US dollar.
Industry and Commerce Deputy Minister Raj Modi said while he was yet to get information on the proposed bread price increase, Government was working flat out to stabilise the cost of goods and services.
“So we are not encouraging anyone to increase the prices. We are doing our best to support them. We are importing wheat, which is already in the country as part of measures to cushion bakers,” he said.
GMAZ chairperson Mr Tafadzwa Musarara added: “We are getting support from the Reserve Bank and, therefore, the price increase cannot be justified on account of flour.
“I guess maybe the increase has to do with other raw materials where they have to either pay in US dollars or equivalent prevailing black market rate. But we are selling them flour at 1:1 with the US dollar.”
GMAZ, he added, was prioritising flour allocations to bakers ahead of confectioners.
However, he said the National Railways of Zimbabwe was slow in moving wheat from Beira, Mozambique, with the parastatal at times bringing in less than five wagons against expected a daily delivery of 50 wagons.
Prices of basic commodities have gone up more than four-fold since last month, with the cost of medicines rising by a factor of 10.