Zimbabwe price controls hit home

Land seizures have not helped Zimbabwe's economic problems

Price controls enforced in Zimbabwe a week ago are already creating huge problems for business, the head of the country's stock market has said.

The pricing of basic foodstuffs at levels 10-20% below normal market levels has left firms selling goods below cost, Zimbabwe Stock Exchange chairman Geoff Mhlanga said.

The price gap is likely to lead to job losses and has increased the chances of food shortages later in the year, Mr Mhlanga told the BBC's World Business Report.

"There is a confusion in the market place over what is going on," he said.

"The bakers looked at the economics of manufacturing and found it doesn't work."

The economic basis of running a bakery has been rendered "nonsensical", Mr Mhlanga added.

"They have to cut back. There have been some lay-offs."

Food shortages - already expected in rural areas because of a grain shortage - could now be a real problem in urban areas.

Crisis?

Zimbabwe is suffering its worst economic crisis since independence in 1980.

Economists say the country's financial difficulties spring, in part, from manufacturers' lack of foreign currency.

The situation has been worsened by a government programme to seize white-owned farms, isolating the country, deterring inward investment.

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

'Miracle of God'

Mr Mhlanga said demand for shares in financial services firms has helped the stock market withstand the country's economic collapse.

Many investors have seen high returns from banking stocks, despite a poorer performance from shares in industrial and manufacturing concerns among the 71 companies listed on the stock market.

"We have survived by the grace of God," Mr Mhlanga said.

"There is nothing that anyone has done to explain why we are still more or less doing business and still making money in various sectors to the economy.

"Other sectors have collapsed altogether... it is nothing less than a miracle of God."