Business Collusions – The Cost of a Crisis

Bulawayo – As the difficulty of doing business in Zimbabwe worsens, businesses have united in their fight for survival after realising that competition is no longer their threat, but the economic environment created by government policies, ENN reports.

A market survey of commodity prices in Zimbabwe, from building materials to food and beverages indicated a more linear relationship that suggests gravitation towards collusion amongst industry competitors.  In a competitive environment, collusion takes place within an industry when rival companies cooperate for their mutual benefit. In Zimbabwe’s case, pricing has become the biggest challenge for companies due to inflationary pressures being experienced in the country. In August 2019, Zimbabwe’s implied annual inflation stood at 288.6%.  Collusion most often takes place in the market structure of oligopoly, where a resolution of a few firms to collude can meaningfully impact the market as a whole. The major advantage of collusion is that it gives colluding firms the ability to charge exorbitant prices for their products, in the process minimising their exposure to unpredictable economic forces such as inflation and exchange rate losses. On the flip-side, the price fix character of collusion fuels inflation and drains consumers of their hard-earned income.

In a functioning economy, competition and tariff commissions always interrogate industry developments around collusions to guarantee fair pricing for consumers. However, in a crisis environment, curtailing collusions may result in commodity shortages as there are a few alternatives to the existing product supply lines.

For Zimbabwe, failure to immediately address the unfolding economic crisis will expose citizens to business collusions, which is now an inevitable survival trump card for Zimbabwean corporates. Such collusions will further fuel national inflation. Business collusions are the cost of a crisis.