Zimbabwe Business Watch : Week 2
Welcome to Business Watch 2008.
Business began with the New Year facing accelerating inflation and more chaos as economic management of the country has now become comical.
Relativity in terms of values diminishes as massive distortions are now evident in the cost of supplying goods and services. This is partly driven by market exchange rates which regularly vary by up to 150%.
Business parity is a problem for companies and it opens the door for opportunists who can exploit this variation in the cost of goods and make huge profits. The informalisation of the economy also is evident in supply of commodities that are short and this has meant that much trading has by passed established businesses.
Added to this is the worrying spectre of price control which often means that viability in manufacture is only retained through exporting and the local market is, from time to time devoid of the locally produced product which is now important from neighbouring countries at great expense.
The Old Mutual Implied Rate has now reached 7.2 million to the US and, correspondingly, the rand is over 1 million. In a bizarre attempt to establish some sense of reality, the Hard Boiled Egg Index is now used to demonstrate fair value – 8 eggs equate to 1 USD and the cost of an egg is up to 500 000 meaning that the fair value rate is around 3.6 million.
