Harare, Zimbabwe (PANA) – As the Zimbabwe economy continues to regress, the Zimbabwe government has made history by enacting the Consumer Protection Act on 10 December, 2019, a law that finally enforces and protects consumers from ‘rent seeking’ behaviour.
According to the American financial literacy firm, Investopedia, rent seeking is an economic concept that occurs when an entity or person seeks to gain added wealth through shrewd or potentially manipulative use of resources.
As such, while millions of Zimbabweans are increasingly becoming more impoverished, some individuals and businesses are profiteering off consumers through rent seeking practices.
Rent seeking behaviour in Zimbabwe
In Zimbabwe, most rent seeking behaviour against consumers happens on pricing, products and profit margins.
On pricing, consumers must contend with two tier pricing models, basically, one price for those using electronic money and another for hard cash. Usually, the electronic price is higher than the one in hard cash.
The reason why this phenomenon is happening is because there is a significant drop in hard cash after the Zimbabwe dollar was reintroduced as the sole legal tender in June.
Foreign currency pricing is also another form of rent seeking.
Despite being outlawed, businesses are still offering US dollar pricing showing that the currency holds more importance than the Zimbabwe dollar, even if the pricing is illegal.
For example, Zimbabwe’s largest fast food company, Simbisa Brands Limited (SBL) registered as a tourist company under the Zimbabwe Tourism Authority to legally offer US dollar pricing alongside local currency prices.
However, the law also states that such institutions can only accept foreign currency from someone possessing a foreign passport whereas SBL is offering US dollar pricing to everyone.
In terms of products, most businesses rely on foreign currency to import raw materials
As such, with the ban on foreign currencies the Zimbabwe dollar continues to devalue leaving businesses to price their goods according to the forex black market to be able to raise enough money to import.
But, with foreign currency generation difficulties from low exports, foreign direct investment and diaspora remittances, businesses are struggling to raise money to import.
Worsening matters is that the Zimbabwe dollar is devaluing, thereby eroding wages and disposable incomes at a time of hyperinflation leaving businesses struggling to maintain monthly revenue.
As a result, some businesses reduce the size of their products especially those which are import dependent.
For example, by law, a loaf of bread is supposed to be sold at 700 grams. If a company does not sell the bread at the legal weight, the law allows for it to be five percent less or 10 percent more.
However, the three main bread producers, namely, Proton, Bakers Inn and Lobels that control 90 percent of the market are selling it on average, at between 10 and 20 less than 700 grams.
This comes as wheat remains largely an imported commodity.
Lastly, another rent seeking practice is profit margins.
Internationally, a general rule of thumb is a 10 percent net profit margin while anything above 20 percent is high.
But, in Zimbabwe, profit margins are in some cases 100 percent or more which tend to make a product or service well beyond affordability.
The Consumer Council of Zimbabwe (CCZ), in conjunction with government, crafted the Consumer Protection Act.
What this law does is it creates a Consumer Protection Commission (CPC), penalties against anti-consumer practices, guidelines for e-commerce, and enforcement of consumer rights.
The Commission shall consist of the Chief Executive Officer who shall be an ex-officio member and twelve other members appointed by the Minister after consultation with the President.
The functions of the CPC will be essentially to promote, enforce and protect consumer rights in the country.
As such, the powers of the CPC cover a variety of aspects regarding consumers.
These include protecting consumers from unconscionable, unreasonable, unjust or otherwise improper trade practices; as well as deceptive, misleading, unfair or fraudulent conduct; promote fair business practices; co-ordinate and network consumer activities and liaise with consumer organisations and the competent authorities and agencies locally and outside Zimbabwe to protect consumer interests.
The CPC will also be able to receive, investigate and prohibit businesses following consumer complaints.
Penalties against anti-consumer practices
For a long time, many consumers have complained to government or the CCZ of being unfairly treated by businesses.
Under sections 78 to 81 of the Act, penalties against anti-consumer practices have been introduced.
As such, these sections make it an offence for any business or person not to comply with the CPC.
Establishing guidelines for e-commerce
With the rise of the mobile penetration rate, currently at 88.2 percent as at the end of the third quarter of the year, retailers are increasingly seeking ways enter e-commerce.
Over the past few years, some of the biggest online shopping platforms to be created include Ownai and Hammer and Tongues Online Shopping Mall.
Under section IV of the Act, it establishes consumer protection for online shoppers that basically holds the website responsible and liable for consumers using a company’s e-commerce website.
One of the areas afforded to consumers under this section is that a consumer must have full information to the products being sold or hired online and that these websites must protect personal information of these online shoppers.
This section also entitles a consumer to cancel without reason and without penalty “any electronic transaction and any related credit agreement for the supply of goods or services within seven days after the date of the receipt of the goods or the conclusion of the agreement; provided that the only charge that may be levied on the consumer is the direct cost of returning the goods”.
Often, online platforms put a fee if a consumer wants to cancel a purchase or transaction which is why the Act now limits this cost to the return of goods, only.
Enforcement of consumer rights
Basically, consumers now have the power under the Act to report any wrong behaviour they may have experienced which can lead to legal consequences.
It essentially allows any person who has failed to have their dispute resolved through alternative resolutions to approach the CPC in the prescribed manner and form, concerning the dispute.
The CPC is given the powers to summon errant businesses should a consumer complain.
Local legal think tank, Veritas said while a lot of the provisions in the Act were already there what this new law does is offer more protection to consumers.
-0- PANA TZ/MA 22Dec2019