By Chigumbu Warikandwa
Word has crept into the market that Government is hiking its employment expenditure by a further $400 million effective this month, which is about 25% of its wage commitments. And the market has climbed prices and goods and services starting from 75 percent to 200 percent. Isn’t this an improper fraction?
Does the market expect to grow its sales revenue by 200 percent from wage earners whose buying power has firmed by a paltry 25 percent? Something somewhere is not right. Discipline and commercial ethics appear to be at their lowest ebb. Business is transactory and a reciprocal relationship between buyers and sellers. This relationship must be complemented with mutual respect and goodwill. While sellers have goods and services, they cannot consume these themselves, instead, they need the consuming public to consume these in exchange for money, which they need for them to stay afloat. Now, if the market inflates and out-prices the buyer, one eventuality is certain; the sellers will one day be stranded with unconsumed goods and services.
The sellers’ market runs the risk of choking itself out of business. This will increase their recurrent costs in warehousing as goods take longer to leave the factory shelf. Their wage bill, rent, insurance and other costs will remain unchanged against a background of depressed sales. If wisdom is to prevail in the market, prices must be tamed so as to maintain a business-friendly equilibrium and goodwill towards industry.
One other certainty is that as long as the local products continue with their upward price inertia, they remain uncompetitive on foreign soil hence no exports will be made to vend for the dollar which industry moans everyday about.
All business confederates have the onus to sit their combined membership down to stick to their side of the social contract with the consumers. Both industry and the market need each other. Designing punitive prices is never a way to promote continued relationships. None of the parties must feel superior or inferior to the other for each complete the lacking arc in each other’s circle of existence.
Without market regulating ethics, industry is bound to fail from self afflictions.
The old adage goes thus; Government has no business in business. True to this old wisdom, government has stood on the market shores to allow business to regulate itself in a free market economy model. Notwithstanding this government goodwill, business has received this non interference approach with oversized zeal and abused it.
Business has the responsibility to self introspect and design means and ways of escaping the vicious cycle of poor commercial performance in a world where demand for goods and services is on an upward surge. If one becomes the odd one out in such an aggressively consuming market it can never be the fault of the buyers for such oddity and its outcomes. The butt ends with the sellers.
In an effort to stem inflation and contain expenditure for the good of the economy, government has chosen to steady its wage bill, much to the happiness of the private sector-the producers of majority goods and services. Paradoxically though, the same private sector which is happy with suppressed wages is happy with hiking prices. This is the irony of a man who wants to lift himself holding self at the waist. Simple economics say if the economy has a buying power of $72, a seller cannot expect to sell the same market goods worth $97. There is no miracle that can stretch money. What is urgently required now is a miracle machine that stretches business sensibilities.
The manufacturers are faced with producing goods for a workforce that cannot afford the same goods it is toiling all day to produce. No phrase can better explain market distortions than the above scenario. The only market left for a seller in such a scenario will be the foreign market. I have already pointed to the poor performance the local goods have on the external market due to higher prices. Openly, the local goods are left with nobody interested in consuming them. Should government be blamed here as some people are so fond of doing? A driver with a faulty exhaust must not blame government for the smoke that engulfs his cab.
The opposite of the above trade relationship becomes imminent. Foreign products become more attractive to local buyers based on lower prices, creating a crippling trade deficit.
What business forgets is that government tends to benefit from price spirals as a wider tax base is availed by higher prices for goods and services. Businesses exchanges goods and services among themselves in the manufacturing cycle. With heightened prices, so will be the tax demanded from them from their punitive pricing models.
Business is not all about spending the whole day on market wires, adding and subtracting profit and losses. It also has to do with sense and ethics. Business must not tempt government to come back on the market to stamp its firm grip and control. Business intransigence cannot be allowed to go forever. Whatever length of rope will sooner or later reach its end.
