What is Truly Driving Zimbabwe’s Sky-High Cement Prices?

By Newton Mambande

HARARE – AS ZIMBABWEANS grapple with the escalating cost of living, the price of cement has emerged as a stark outlier, sparking concerns of profiteering and market manipulation. A bag of cement, a critical input for the country’s rapid urbanization and infrastructure development, now costs a staggering $15—a price tag that is not only exorbitant but also puzzling, given the presence of over five cement manufacturers in the country.

According to Adam Smith’s theory of demand and supply, an increase in demand should lead to an increase in supply, thereby stabilizing prices. However, in Zimbabwe’s case, the demand for cement is being met with artificially inflated prices, suggesting that factors beyond market forces are at play.

One of the primary drivers of the high cost of cement is the crippling energy crisis, characterized by frequent power cuts and high fuel costs. Cement production is an energy-intensive process, and manufacturers are forced to pass on the increased costs to consumers. The recent hikes in fuel prices have only exacerbated the situation, making it even more challenging for manufacturers to maintain production levels.

Furthermore, the country’s rapid urbanization and infrastructure development have created a surge in demand for cement, which has outpaced supply chain capacities. However, this demand-driven growth has also created opportunities for profiteering, with some manufacturers allegedly prioritizing profits over production.

The Zimbabwean government’s fiscal and monetary policy management has also contributed to the high cost of cement. The country’s notoriously high tax regime, with over 94 taxes, has placed an undue burden on businesses, forcing them to increase prices to remain afloat. The weak ZiG currency exchange rates have also made it challenging for manufacturers to import raw materials, leading to higher production costs.

The parallel market’s influence on the exchange rate has also led to a situation where businesses are opting to price their products in US dollars or their ZiG equivalent, further fueling inflation.

To address this issue, the government must take decisive action to address the underlying causes of the high cost of cement. Firstly, taxation reforms are urgently needed to reduce the burden on businesses. The recent business license reforms are a step in the right direction, but more needs to be done to simplify the tax regime and reduce the number of taxes.

Secondly, the government should consider ending the multi-currency regime and allowing the US dollar to become the sole legal tender for an indefinite period. This would help stabilize the exchange rate and reduce inflationary pressures.

Finally, the government should take lessons from countries like Israel, which has successfully implemented policies to attract foreign investment and stimulate economic growth. However, caution must be exercised to retain a mono-currency regime and maintain a stable financial market.

Overall, the high price of cement in Zimbabwe is a symptom of a broader malaise affecting the country’s economy. Addressing this issue will require a comprehensive approach that tackles the underlying causes of high production costs, energy challenges, and fiscal and monetary policy mismanagement. Only then can Zimbabwe create an enabling environment conducive to business growth and attract prospective investors like Aliko Dangote to tap into the country’s vast potential.

Recommendations:

1. Introduce taxation reforms to reduce the burden on businesses.
2. End the multi-currency regime and allow the US dollar to be the sole legal tender.
3. Implement policies to attract foreign investment and stimulate economic growth.
4. Address energy challenges and reduce production costs.

About the Author: Newton Mambande is an entrepreneur and researcher with a passion for economic analysis and policy reform. He has published scientific research in journals and can be reached at newtonmunod@gmail.com or +263773411103.