Without a commitment to future policies, the incentive to speculate and deviate into an informal market is often cataclysmic. This lack of clarity itself is often the single largest contributor to black market transactions. The Minister of Public Service, Labour and Social Welfare announced that salaries have actually not been frozen.
The salary freeze directive implemented through Statutory Instrument 159A of 2007 is to be amended to allow increases through collective bargaining processes. The changes seem to be a pre-emptive reaction to strike threats by workers.
The Statutory Instrument however introduced a new potent threat, empowering the government to take over companies that reduce or stop producing owing to the current price controls. The recent directive comes soon after the debilitating price control directive, SI 142 (2007) which also suffered inevitable moderation and flip-flop due to its negative impact on the fiscus.
The month on month inflation figures in July 2007 dropped 31.8% in July and 11.8% in August. The annual rate of inflation dropped 1,042% from 7,634.8% to 6,592.8%. The reasons for the decline are obvious. The price controls introduced by government on 25 June created artificial ‘pull' fundamentals.
The CSO would also have calculated the figures based on controlled prices even though the goods were available at a premium on the underground ‘black market'. The Zimbabwean financial market is incredibly resilient. In a normal market, so many changes in such a short time would cause volcanic tremors. Investors to their credit have turned immune to constant policy gyrations.
Read the full article here: http://www.newzimbabwe.com/pages/markets11.16953.html
