ESD FIELD BASED ASSIGNMENT 1

A number of retail shops have hiked the prices of commodities in recent months.
Visit at least two retail shops to investigate the cause(s). Suggest ways of bringing
stability with regard to pricing. How important are business ethics to the nation at
large?

Objectives:
1. To Establish the causes of price hikes
2. To Evaluate the impacts of price hikes on the people
3. To evaluate the importance of business ethics
4. Suggest ways of stabilizing the situation and the way forward

Methodology:
The information was obtained through interviews of relevant persons in the retail
business, internet research, and various news sources such as newspapers,
television and social media. A survey was conducted and the results are hereby
presented. Also included are the various steps being taken by the retailers and
manufacturers in order to control the situation. I will also examine how the
business ethics that should control such a situation from escalating are being
followed or being overlooked.

Findings:
After visiting various retailers, I have established that are several causes to the
price hikes.
1. The existence of the parallel market.

The parallel market with its speculation has greatly affected the prices of
commodities. The demand for the us dollar was increased thereby less and less us
dollar was put into circulation because people were afraid to sell their us dollar in
case the us dollar would flood the market and become worthless. The parallel
market was increasing the rates for the us dollar against the bond almost hourly
and this then made the bond note lose its value and thereby every retailer or
person selling goods started using the us dollar as the yardstick for all purchases.
Therefore, it separated the bond from the us dollar and made them separate
currencies. This then made retailers uneasy about selling their products in bond
or at the official 1:1 exchange rate so they adjusted their prices in order to be able
to restock their products and to make a profit. This raises an important question
on the importance of business ethics. Business ethics require transparency and
integrity and this was not being followed. Retailers only looked at their profits and
not on the impacts that price hikes would have on the people.

2. Acute shortage of hard currency

Zimbabwe is currently experiencing a shortage of hard currency. The bond note
was supposed to be the surrogate or the legal tender for the us dollar. However
due to some illegal activities and the parallel market trading bank balances
increased significantly. There are currently only 200 million bond notes in
circulation but there is over 10 billion in bank accounts that is being traded in
RTGS transactions. Therefore, this created a discrepancy because there was not
enough money in hard currency to support the rtgs balances and this caused
widespread panic among retailers. The Retailers therefore reacted by hiking
prices in order to protect their interests.

3. Fuel Price Hikes

This was one of the major catalysts to the worst price hikes currently being
experienced. Fuel was being subsidized by the government and being sold at 1.40
a liter, however demand for petrol was so high that the government realized that
fuel needed to be sold at a price that aligned with the taxation that came with the
product and also in order to reduce demand the government made mandatory a
fuel price of $3.31 and $3.11 a liter for petrol and diesel respectively. This then
sparked an immediate response by retailers. Historically in most countries when
the price of fuel goes up, markets respond by increasing the price of basic
commodities. This is exactly what happened when the fuel price went up markets
responded by devaluing the bond note and by so doing everything else went up.
Retailers said that they were preventing their stocks from finishing on the other
hand they were depriving the population of basics at affordable prices.

4. Suppliers increasing costs

The price of imports has increased greatly due to a shortage of hard currency,
and higher transport costs with increases in taxation all culminating in the
costs of importing basic goods going up. Due to this, suppliers of basic goods
such as wholesalers and large commodity store chains have significantly
increased the price of commodities. This has a chain reaction in that when
suppliers increase the price of goods the retailers who buy from the suppliers
also have to increase their price so as to be able to make a profit and to
replenish their stock once it gets bought up. Therefore, the price hike can be
attributed to this factor due to the fact that all the involved parties i.e. the
retailer and the wholesaler are all running a business therefore they have to
protect their interests and avoid large losses. On the other hand, the problem
with this arrangement is that there has to be a reasonable degree to which the
parties involved increase the prices of stuff because in the case of the recent
months what ended up happening is it became a free for all arrangement
whereby every retailer and supplier began pricing things at whatever price
they wanted to, this caused a wave of exorbitant pricing that greatly made the
lives of the ordinary Zimbabwean very difficult. One would assume that
retailers are not to blame in this situation because they simply followed what
the suppliers were doing but this argument can also be questioned as to why
the situation escalated so much to the point where buying the basics was
almost impossible for the ordinary person.

5. Panic buying and hoarding

 When the first wave of price increases first surfaced in August 2018 It
started a precedence for the phenomena of panic buying and hoarding.
When people learned that prices of commodities were increasing they
quickly reacted by going to stores and hoarding all the basic commodities
such as mealie meal, cooking oil, sugar and bread. This caused a great
deficit in the shops because there was now a shortage of those basic items.
whenever demand for a product goes up the price usually goes up with it.
This is exactly what happened as demand went for example in the case of
cooking oil, it was costing about $3.50 for a 2-liter bottle and in about 3
days it went up to $12. However, this was not all shops, the big stores such
as Pick and Pay and OK Stores did not follow this exorbitant pricing but
other smaller stores did and this the resulted in confusion amongst
consumers and it accelerated the panic buying, and hoarding because
whenever people would find the commodities at a lower price they would
then stockpile and then sell these at a later time for a sometimes 200%
premium on the original price. This caused retailers to then resort to having
limits on purchases such as 2 per customer for all the basic commodities.
Due to this people would queue for the commodities but would be forced
to buy them at a higher price as retailers were aiming to reduce demand
thus beginning the price hikes.

6. Rising costs of inputs for goods processing

In order for goods to be produced there has to be inputs such as raw materials
and packaging. In Zimbabwe currently in order for basic commodities to be
produced this has become expensive, due to prices of raw materials such as
wheat flour and soya beans increasing over the past few months. Packaging
companies such as Hunyani have shut down and this means that
manufacturers have to import packaging such as polyethylene terephthalate
(P.E.T) and other plastics. Importation of these is made even more difficult by
the shortage of currency and other factors such as transport costs. This means
that by the time the packaging arrives compiled with the cost of raw materials,
the finished product is already more significantly expensive than before. When
 suppliers stock the product after adding their markup by the time it gets to the
public it is already higher priced than before.

All these factors bring forth the question: How are business ethics being
followed amidst all these price hikes?

Business Ethics involve social responsibility and businesses should be able to look
to improving people’s lives and not to take away peoples joy by indiscriminately
increasing prices of commodities to the point where people are not able to buy
the basics. This is prevalent today in Zimbabwe because retailers are only looking
out for their interests not those of people. Transparency and trustworthiness are
essential ethics that should be followed in Zimbabwe and currently most
businesses are not employing these in their business practices.
However, on the other hand there are businesses that are conducting business
ethically in that they are not indiscriminately raising prices but are rather looking
for ways to continue being transparent. Also the price hikes are also a way of
protection for businesses in that they help the business to retain its stock and to
keep restocking and making profit. Businesses are also looking towards the future
and they somehow do this by maintaining a higher price so as to be able to buy
foreign currency from the parallel market.

Impacts of price hikes on the nation and business

The price hikes affected almost all of the Zimbabwean population, basic
commodities were harder to obtain and even the luxury items were even beyond
reach for many. Most Zimbabweans were able to buy basics such as bread, milk,
deodorant amongst many other things however, over the course of some weeks
they were not able to buy these things. Salaries were devalued overnight and
most Zimbabweans lamented that they needed more money. Discontent was
common amongst people and stress levels escalated. The quality of life was
reduced as most people could not afford to buy the stuff they wanted but had to
buy what they could afford such as Mealie meal, Cooking oil and vegetables. Diets
suffered as they only consisted of staples and no other variety of foods to balance
the diet. Meat for example was the last thing on the people’s minds as they
worried about just having food to eat.
Businesses were also affected by these price hikes, instead of their products
moving in numbers, most retail shops lost money because most citizens stopped
spending their meager salaries buying a full grocery but rather they only bought a
basic grocery. This resulted in most other luxury items such as milk, deodorants,
coffee and breakfast items in shops sitting on shelves and in fridges for months.
Therefore, businesses lost money and had to somehow adapt.

Solutions for bringing stability to pricing:

There are several ways of bringing stability to the pricing these include retailers,
consumers, suppliers and the government taking significant action.
Retailers can ease the situation by following business ethics and avoiding
exorbitantly increasing prices. They can also take measures to protect against low
profits by finding cheaper suppliers and buying from local manufacturers if the
goods are available. They should endeavor to follow the government gazette
prices for goods and thus improve the situation.
Consumers can help the situation by avoiding panic buying and hoarding which
accelerate the price hikes by creating a demand for products which might not be
in shortage but because of high demand there is a push and pull effect that
increases prices
Suppliers can do their part by also practicing good business ethics and not
charging a high premium on goods that they supply to the retailers. Retailers rely
on suppliers for their prices so it causes a chain reaction when the supplier hikes
prices, retailers have to follow suit and also hike prices resulting in an
uncontrollable situation such as that which is occurring currently.
The government also has a large part to play in bringing stability. Retailers and
Suppliers lament a lack of hard currency for importation, sometimes unfavorable
duties and tax, and the parallel market as factors that cause them difficulties.
Government can implement policies that are more favorable to the businesses
importing goods for retail by reducing taxation on imports, making available hard
currency on a reliable and regular basis in order that imports are easily obtained.
Many retailers and suppliers have mentioned that a steady currency could be a
solution to the price hikes because if there is a steady currency it will become the
base for all transactions instead of the surrogate bond note which is being traded
at an exchange rate on the parallel market. Manufacturers could also use
governments help to revive their businesses which have since failed due to the
harsh economic climate in Zimbabwe. They need government bailouts in order to
start producing again and reduce the amount of imports into Zimbabwe but
instead increase exports and bring in foreign currency.

In conclusion therefore, the price hikes were the culmination of years of harsh
economic conditions, unscrupulous business practices, public fear, panic and
speculation and a manufacturing sector that is failing to produce enough for the
citizens. Much can be done to improve the situation for the better and in the long
run all involved parties should take a serious look at their actions and improve for
the future generations to have a comfortable prospect. If the situation were to
continue the same there would be widespread hunger and other unfavorable
consequences. The bottom line is that it is not a hopeless situation but if
addressed correctly it can be a learning curve for the nation of Zimbabwe.