Panic buying, a weakening metical, and tighter border controls are all likely to be contributing to an increase in the price of basic goods in Mozambique — but the authorities insist there is no reason to fear shortages or significant price inflation.

There is no reason for a supply shock or rapid price increases, the National Inspectorate of Economic Activities said today — adding that it is speaking to the health and immigration authorities to investigate why the prices for certain goods have risen in the wake of tougher measures to contain coronavirus.

“Probably the most immediate concern is ‘panic buying’ and speculative behaviour as logistics options to import from South Africa are curtailed,” said Sam Jones, a Maputo-based researcher with the United Nations University World Institute for Development Economics Research (UNU-WIDER).

At the Machipanda border post with Zimbabwe, people and goods continue to circulate freely, the head of the border post told Zitamar. New restrictions at the Ressano Garcia border post, the main crossing with South Africa, apply only to people and not goods, supermarket chain Woolworths confirmed, saying: “Commercial goods are still allowed to transit across borders as this is an essential service to ensure that consumers still have access to food.”

However, outside of the large commercial chains, the flow of imports could become more limited.

“Much of the cross-border trade is small-scale or semi-formal in nature, and therefore may not survive the current border closure,” he said. “So individual livelihoods will be hit already and some supply chains will be closed off. This will add further upward pressure on prices.”

At Maputo Port it is “business as usual,” spokesperson Soraia Abdula told Zitamar News — despite measures limiting the movements of ships that have recently docked in corona-infected countries. Ores mined in South Africa are still arriving at the regular tempo, Abdula said.

The global economic slowdown means that demand for those raw materials is likely to drop, however. 

“The looming global recession and weaker global commodity prices will almost certainly lead to substantially lower exports, and prompt investors (e.g. in LNG) to delay further investments,” Jones said.

These effects, coupled with a dramatic fall in foreign tourist arrivals and only partly offset by cheaper imports of inputs such as fuel, “should put pressure on the Metical, which we have already seen devaluing over the past weeks. In turn, prices can be expected to creep upwards due to imported inflation,” Jones said.

Protect the poorest as lockdown looms

At the same time, many Mozambicans’ livelihoods will be threatened by the economic downturn.

Jones foresees “a slowdown of the services sector, which is key to the urban economy — probably more at the high value end, but also more generally as clients stay away.”

Restaurants are already closing — and others are reducing staff. As businesses struggle, more households will lose access to income. “With less cash circulating, everyone ends up being affected,” said Jones.

South Africa, and much of the rest of the world, is imposing and enforcing a ‘lockdown’ to prevent people from leaving their homes. Mozambique has not yet announced if it will follow suit.

This would have an impact on the incomes of many more households. As families do not have the resources to stockpile food, many could go hungry.

“A badly managed lockdown certainly could lead to civil unrest if no safety net is available. However, a moderate lockdown alongside guaranteed supply chains and some reasonable community-level aid, such as distributing basic food, could probably avoid major unrest — and actually improve the situation for many people,” said Jones.

“Clear and credible communication by the government — on both health and economic effects [of Covid-19]— to manage expectations, alongside the creation of an urban safety net, could help ameliorate the impact on the poorest. More will be needed the worse it gets. That said, this is completely uncharted territory, and it is very difficult to look beyond one week, let alone one month.”

© 2020, Zitamar LTD. All rights reserved.