Mugabe threatens business takeovers

Land invasions have helped erode business confidence

Zimbabwean President Robert Mugabe has said his government will take over companies which close due to the new compulsory reductions in food prices.

The government announced controls on the prices of basic foods last week, provoking many Zimbabwean food manufacturers and retailers to say they will go out of business.

In most cases, soon after price control is implemented basic commodities disappear from the shelves and a black market develops

Market analysts

Price controls were first introduced in the 1980s, but were abandoned in the 1990s when the government decided to implement the IMF and World Bank economic reforms.

But speaking at the funeral of a former cabinet minister on Monday, Mr Mugabe denounced the reforms saying they had not eased the cost of living.

He said his government would therefore take over firms which could not, or would not, sell basic foodstuffs like bread and cooking oil at the new reduced prices.

'Absolute nonsense'

"Every hour and every day, prices are going up. Why do they?," he asked.

"Is it expected that we shall fold our hands and say 'aah yes', the economic laws are truly interplaying. Don't intervene, don't disturb them. That's nonsense, absolute nonsense".

Mugabe is signalling a return to socialist economics

Independent studies suggest the price of some goods such as soap and vegetables have risen by up to 180% since January.

Mr Mugabe said workers would take control of the firms acquired by the government and that Zimbabwe would then have the socialism it had always wanted.

The Zimbabwean Government has accused companies of seeking to undermine its popularity by repeatedly raising prices.

Mass unemployment

It says these companies, many of which are white-owned have a political agenda, but the companies say they have been forced to put food prices up because of the ever-rising cost of doing business in Zimbabwe.

Economists warn that the price controls will lead to closures and yet more unemployment.

Every hour and every day prices are going up? Why do they? Is it expected that shall fold our hands and say 'aah yes', the economic laws are interplaying?

President Mugabe

Already one of Zimbabwe's largest bakeries has announced large-scale job losses.

Market analysts Rashid Mudala and Danny Masaiti said: "In most cases, soon after the introduction of price controls basic commodities tend to disappear very quickly from the shelves and a black market develops."

They said in a report that the government should be attacking escalating inflation, which last month reached a record 76% and the uncontrolled growth in the money supply.