Zimbabwean bakers’ profits crumble amid Russia-Ukraine crisis

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Zimbabwe’s bakers are losing staff and profits as the Russian invasion of Ukraine disrupts the global economy.

 

 

By Staff Reporter 

 

HARARE – Four months ago, Simba Muchingami was a very happy man.

 

Customers were queueing outside his modest bakery in Kuwadzana, a high-density residential suburb west of Zimbabwe’s capital, Harare, to get freshly baked sugar buns, doughnuts and other confectioneries.

 

 

“This place used to be packed around this time,” the 33 year old told Al Jazeera. “From 5am, we were busy. Now there is no one.”

 

A tray containing some doughnuts sits abandoned on the floor.

 

Packed fresh sugar buns are neatly arranged on a large table but there are no customers. In the corner, a worker sits idly on a chair.

 

In 2000, former President Robert Mugabe seized farms from white commercial farmers who had gotten them in colonial times in a controversial land reforms programme, and distributed them to new Black owners.

 

Most of them had little or no capital, leading to declining agricultural output, forcing Zimbabwe to look abroad for alternatives.

 

Since then, it has relied on imported wheat – as much as 40 percent of its total imports came from Russia in 2021 – for bread, a staple in the country.

 

After Russia invaded Ukraine in February, global supply chains were disrupted, triggering a massive jump in commodity prices – that has severely affected many countries, including in Africa.

 

In Harare, Muchingami has found things tough six months on. He and other bakers have hiked the price of bread to $1.30 from $1 due to the increase in prices of key ingredients.

 

These days, he sells half of what he used to sell even four months ago and he has let go of five of his eight employees.

 

‘The impact … is huge’

Harare-based independent economist Victor Bhoroma said the economic effect of the war is pronounced in Zimbabwe because of its reliance on imports.

 

“The impact on the Zimbabwean economy is very huge as 80 percent of the raw materials used in the local manufacturing sector are imported, hence the bottlenecks caused by the war have slowed the movement of cargo into the country,” Bhoroma said.

 

“The increase in freight charges and commodity prices (fuel, wheat, soya, fertilisers, and chemicals) also means that cost of production locally has skyrocketed,” he added. “The cost of fuel has gone up from about $1.40 per litre before the war to $1.90 now.”

 

The southern African country is already in the throes of an economic crisis due to high inflation. Ninety percent of the country is unemployed, according to the Zimbabwe Congress of Trade Unions (ZCTU) and its manufacturing output is on a decline.

 

Its few manufacturing industries that relied on raw materials from farms are now also operating way below capacity due to the scarcity of raw materials.

 

So Zimbabwe’s bakers are feeling the heat.

 

Rico fat, a key baking ingredient, was $3 a kilogramme four months ago but is now $4.50/kg, says Muchingami. The price of two litres of cooking oil is now $4.80 from $2.80 a few months ago. A 50-kilogramme bag of flour now costs $35 from $28.

 

“Our prices have unfortunately not moved up as much,” he told Al Jazeera. “We have not been able to pass our costs to customers because our clients are vendors and they don’t understand that we need to increase the prices.”

 

“We are barely keeping our head above the water. If we increase our prices by Z$10 bond ($0.0125) per dozen [pieces], it’s a war with the customers,” he says. “I have to hike prices gradually.”

 

In a country with a history of hyperinflation and the local currency rapidly losing value, there is a prevailing dilemma.

 

In 2009, the country had to ditch its currency for the United States dollar as hyperinflation decimated the former currency. And currently, the Zimbabwe dollar is trading at 800 to a US dollar on the black market.

 

More residents unable to keep up with costs of living, want to buy with the local currency even as more vendors unable to keep up with costs of production, want to be paid in the foreign currency.

 

“We charged in US dollars but the customers say they don’t want to pay that. So we sell at the prevailing black market rates [for the local currency].”

 

Inflation in Zimbabwe has also been on an upward trend in the past few months. It jumped to 259 percent in July from 191 percent in June due to the introduction of new currency bills into the economy and the global spike in commodity prices.

 

Bhoroma fears that things could get worse, and quickly.

 

“Considering we have elections around the corner where subsidies to farmers and households play a key role, I do not see any breaks on money printing or any reforms to build confidence in the central bank before the 2023 elections,” he said.

 

Alarm bells

 

National Foods Holdings Limited, the largest milling company in the country, has sounded the alarm already, also warning of more Ukraine war-induced price shocks.

 

Prosper Chitambara, a development economist with the Labour and Economic Development Research Institute of Zimbabwe (LEDRIZ) in Harare, says poverty will increase.

 

“The major impact of the war in Ukraine is it’s going to slow down economic growth. Last year, the economy grew by 8 percent. On account of the war and other internal factors, overall growth will be adversely affected.”

 

“The war in Ukraine has worsened a situation that was already dire in Zimbabwe,” Chitambara told Al Jazeera.

 

But while the global economic environment remains volatile, Zimbabwe’s exchange rate and rising public spending are also to blame, he said.

 

“Public spending and money supply tend to increase as well when there is an election. That doesn’t augur well for the economy,” he added.

 

For smaller businesses such as Muchingami’s, this could be a death knell.

 

Apart from rising prices, he has to contend with power outages which Zimbabwe has been experiencing for the past few months.

 

Although he puts on a brave face, his voice betrays the strain he is under.

 

“If only the exchange rates could be stable for a month or two, I would be fine. When you think you have made a profit, the exchange rate changes and your earnings vanish like that,” he added.

 

SOURCE: AL JAZEERA

 


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