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Forex scheme exposes rip-offs
The Herald (Zimbabwe)
October 10, 2008

http://allafrica.com/stories/200810100007.html

Some retailers and hotels are discouraging the use of local currency by charging astronomical prices for both locally produced and imported goods.

The same products are being quoted in foreign currency, which appears cheaper at face value.

Apart from charging high prices, these shops are demanding cash payments.

A glass of soft drink at the Holiday Inn in Harare is costing $2 million or US$5.

With $2 million cash, one can buy not less than US$300 even at yesterday's black market cash rate although the hotel does accept swipe cards.

It also means one would have to visit the bank no less than 100 straight days withdrawing the maximum $20 000 everyday to be able to buy a simple drink at the Holiday Inn.

Meikles Hotel in Harare is charging $700 000 for a glass of orange juice. Alternatively, one can pay US$2.

"The prices (in local currency) are really shocking. Can you imagine a glass of a soft drink costing $2 million cash?" said a patron at the Holiday Inn.

The National Incomes and Pricing Commission has directed members of the Zimbabwe Council for Tourism and Hospitality Association of Zimbabwe to revert to September 26 prices as the recent increases were not approved.

"The NIPC in conjunction with ZTA carried out a survey of a number of hotels, restaurants and food outlets to establish prices that are being charged in Zimbabwe dollars.

"We established that in contravention of the directive from NIPC that prices in the hospitality industry be approved by the commission prior to being implemented, players in the industry are increasing prices without regard to the provisions of the law," chairman Mr Godwills Masimirembwa said.

Mr Masimirembwa said the prices that were being charged were not only illegal but were excessive as to induce a sense of shock and outrage in Zimbabweans who patronise the facilities.

He urged those in the industry to apply for price reviews to the commission because failure to comply could result in prosecution.

Meanwhile, a Bulawayo-based sports administrator said some shops selling goods in local currency were charging astronomic prices.

Giving an example, he said a pack of six candles is selling at $100 000.

Shops licensed to charge in foreign currency are charging US$3 for the same product.

Such price disparities were also evident in some supermarkets, pharmacies, food outlets and some beer drinking places, according to snap survey by The Herald.

People are angry over such "unrealistic" price disparities and urged quick intervention by the authorities.

"It seems our business people are taking advantage of the on-going talks between political parties here and thinks there is no one in control.

"Action has to be taken (by the Government) to protect the vulnerable public," said Mr Josphat Ruwati.

A senior Reserve Bank of Zimbabwe official said businesses using the dual pricing system should use the prevailing inter-bank rate when converting prices, rather than the black-market cash or cheque rates.

Observers have noted most people were likely to end up buying foreign currency on the parallel market to avoid the exorbitant prices charged for goods being sold in local currency.

Mr Masimirembwa said the price regulator was monitoring the situation.

"We are closely watching the situation but we would like to see hotel operators, wholesalers and shops to use the pricing formulas we had issued to them," he said.

Most shops have not slashed prices which they had pegged using the RTGS rate even after the Reserve Bank of Zimbabwe blanket suspension on the payment system last week.

The NIPC said wholesalers and shops overcharging goods sold in foreign currency faced prosecution.

The NIPC's warning comes at a time when there are massive price distortions meant to discourage the use of the local currency by shops, hotels and pharmacies.

In a statement, the commission said it carried out a survey that showed prices being charged for imported and in some cases locally produced commodities being so excessive as to induce a sense of shock and outrage.

The commission also warned shops that import foreign goods but are not licensed to sell in foreign currency of prosecution.

NIPC also gave a price formula for shops as follows: foreign currency cost (including cost of transport, etc) converted at the prevailing inter-bank rate plus local cost plus 50 percent mark-up.

If a commodity cost US$2 and foreign currency cost of transport, etc, is US$0,10, and the inter-bank rate is $180 to the US$, the cost in Zimbabwe will therefore be US$2,10 x 180x1,5, which gives Z$567.

A survey by the Herald also shows that prices being charged by some furniture shops in Harare are three or four times higher than what some shops in South Africa and Botswana are asking for in US dollars

For example, a 32-inch flat screen TV set at TV Sales & Hire costs US$3 140 while the same TV set is going for US$850 in Botswana.

Barbours is selling a two-door Capri fridge for US$1 195 compared to US$173 in Botswana.

An LG home theatre at TV Sales & Hire is going for US$260 but costs US$150 in South Africa.

Some businesses now have a three-tier price system with one pharmacy in Mount Pleasant asking a patient to pay $85 million if he was paying by cheque, $200 000 cash or US$20 for medication.

Standard fares for urban commuter transporters have been fixed by the NIPC after consultation with the bus owners.

Addressing a Press conference in Harare yesterday, Mr Masimirembwa said the following charges would apply.

Urban commuter omnibuses will charge:

$3 000 for trips 0km-10km;,

$4 000 for trips 10km-20km;

$5 000 for trips 20km -30km.

Urban conventional buses will charge:

$2 500 for trips 0km-10km;

$3 500 for trips 10km-20km;

$4 500 for trips 20km-30km.

Mr Masimirembwa said the fares would be effective until October 31 when they would increased by 25 percent and by another 25 percent in December.

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