No huddling around TV waiting for the budget presentation
Bullish Thoughts did not even bother listening to the MoF presenting
the 2013 National Budget. He did not expect anything that would shift the markets.
During the Z$ era (or at least when the Z$ could still buy in
2006-September 2008), we would all surround the 14 inch ‘guvhu out’ TV set and
wait anxiously for the MoF to announce the National Budget or the supplementary
one popularized by Minister Murerwa back in the days.
The tax free threshold was the main attraction while the tax free bonus
threshold was what it was…a bonus!
This time around, workers did not have that adrenalin moment. If
anything, it was only civil servants who were very much interested in their
increment.
The tax free bonus of $1000 may just turn out to be but a number.
How many companies can afford that kind of payout to begin with or even
a bonus pay out at all?
The manufacturing sector in in dire straits…capacity utilization has
taken a dip and there is just no demand for local products…the majority of them
that is!
When falling inflation is not celebrated…
Zimbabwe’s inflation has been fairly low as a statistic that is.
However, its slowly risking becoming just a statistic.
All students of Economics will know of Japan & the Great Deflation.
Prices were so low in Japan that industry existence remained challenged for
more than a decade. It even got worse when prices started falling.
Whilst to consumers this may be good news, the same is not true for
producers.
Producers need inflation to make profit. Rising prices imply you have a
better chance of selling your product or service at above cost of production.
Closer home in Zimbabwe, manufacturers have an idiosyncratic scenario
where they have sub optimal operating costs (high labour costs, high power
& water costs, high finance costs) which impact materially on the final
price of the product.
Now the cost of production is going up and lack of demand is causing market
prices to go down.
It doesn’t make economic sense to use premium pricing for a low quality
product worse still in a falling prices market.
We have even seen some gymnastics from corporates experiencing price
ceilings on their products no matter how good themselves think of their
products. The Cascade is now smaller while Delta had the balls to take Shumba
Mahewu to 60c. Psychologically, Zim consumers do not accept prices above 50c
for cordials and other smaller package products.
If the economic environment does not change Zimbabwe may become the
first country in the world to suffer economic damage from both hyperinflation
and low inflation.
PUPS…
Anyone remember the Beverly Building Society little book that would be
put on a typerwriter to record your transactions?
Bullish Thoughts never had one but remembers seeing such little bank
book (the red one for daily transactions and the blue one for PUPS).
It would be interesting to see the uptake of such products or the keenness
of mortgage finance institutions to resume such products…
Back in time: No love lost…
Bullish Thoughts thinks he was in Form 2 around this time. Do not ask
him where he got this from suffice to say he couldn’t help but smile. Never
mind the reason for the smiling!
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