Bakers’ profits plummet in Russia-Ukraine crisis – DailyNews
FOUR months ago, Simba Muchingami was a very happy man. Customers lined up outside his modest bakery in Kuwadzana, a high-density residential suburb west of Zimbabwe’s capital, Harare, for freshly baked sugar buns, donuts and other sweets.
But these days, his medium-sized electric industrial oven is often chilly even in the mid-morning, unlike times past when things were already rowdy at dawn. “This place was packed at that time,” the 33-year-old said. AlJazeera.
“From 5 a.m., we were busy. Now there is no one. A tray containing donuts is left on the floor. Fresh wrapped sugar buns are neatly laid out on a large table but there are no customers. In the corner, a worker sits with his arms crossed on a chair. In 2000, former President Robert Mugabe seized farms from white commercial farmers – who had obtained them during colonial times – under a controversial land reform program, and distributed them to new black owners .
Most of them had little or no capital, which led to a drop in agricultural production, forcing Zimbabwe to seek alternatives abroad. Since then, it has relied on imported wheat – up to 40% 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 spike in commodity prices, which severely affected many countries, including in Africa.
In Harare, Muchingami found things difficult six months later. He and other bakers raised the price of bread to $1.30 from $1 due to rising prices for key ingredients. Today it sells half of what it sold four months ago and it has laid off five of its eight employees. Harare-based independent economist Victor Bhoroma said the economic effect of the war is pronounced in Zimbabwe due to its reliance on imports.
“The impact on the Zimbabwean economy is very significant as 80% of the raw materials used in the local manufacturing sector are imported, hence the bottlenecks caused by the war which have slowed the movement of goods in the country” , Bhoroma said.
“Rising transportation costs and commodity prices (fuel, wheat, soybeans, fertilizers and chemicals) also mean that the local cost of production has skyrocketed,” he added. “The cost of fuel has gone from about $1.40 a liter before the war to $1.90 today.” The southern African country is already in the throes of an economic crisis due to high inflation.
According to the Zimbabwe Congress of Trade Unions (ZCTU), 90% of the country is unemployed and its manufacturing output is in decline. Its few manufacturing industries that depended on raw materials from farms are now also operating well below capacity due to the scarcity of raw materials. Zimbabwean bakers are therefore feeling the heat. Rico’s fat, a key ingredient in baking, cost US$3 per kilogram four months ago, but is now US$4.50/kg, Muchingami says.
The price of two liters of cooking oil is now US$4.80 compared to US$2.80 a few months ago. A 50 kilogram bag of flour now costs 35 USD instead of 28 USD. “Our prices unfortunately haven’t gone up as much,” he told Al Jazeera. “We haven’t been able to pass our costs on to customers because our customers are suppliers and they don’t understand that we need to raise prices.”
“We’re barely keeping our heads above water. If we raise our prices by $10 per dozen [pieces], it’s a war with customers,” he says. “I have to raise the prices gradually.” In a country with a history of hyperinflation and the local currency rapidly losing value, there is a dilemma that prevails. Bakers’ profits plummet amid Russia-Ukraine crisis In 2009, the country had to ditch its currency for the US dollar as hyperinflation decimated the old currency. And currently, the Zimbabwean dollar is trading at $800 to the US dollar on the black market.
More and more residents unable to meet the cost of living want to buy with the local currency, while more and more sellers unable to meet the cost of production want to be paid in foreign currency. “We charge in US dollars, but customers say they don’t want to pay that.
We therefore sell at the prevailing rates on the black market [for the local currency].” Inflation in Zimbabwe has also been on an upward trend over the past few months. It fell from 191% in June to 259% in July due to the introduction of new banknotes into the economy and the global surge in commodity prices. —AlJazeera