Micheal Jjingo is the General Manager Commercial Banking at Centenary Bank.(PHOTO /Courtesy)
What should we do? “The continuing spike in prices is bad for consumers, for our economy, and bad for all other businesses. It’s hurting us and costing us jobs” Jodi Rell.
Apart from the Covid 19 lock down effects, Russia’s invasion of Ukraine hit the commodity markets, pushing food prices to a record high, and in turn affecting the purchasing power of the community. Prices for fuel, wheat, soap, sugar et al. were affected. With food, fuel and imports disrupted, the population faces high costs and uncertainty about some supplies for some time.
Rising commodity prices increase the cost of the goods made by producers who will, in turn, often pass on those costs to consumers. We tend to notice price increases most for products that we purchase frequently, such as grocery items and fuel for our vehicles. All else held constant, higher prices paid for daily necessities leave us with less spending money in our pockets.
For many years, the inflation rate in Uganda has been relatively low, hovering around 3-4% (headline). However, in recent months, that rate has increased dramatically, 7-10%. Inflation in specific categories like fuel, matooke prices has been even higher, nearing or even over 20%.
When the going gets tough, the tough get going! Many consumers should certainly resort to discount sellers. If you have been shopping from an affluent targeting supermarket, better to consider the corner shop in the neighborhood.
Several sellers, especially the new to market, and those clearing stock are running rock bottom priced promotions. And indeed, better for consumers to respond to inflation by pursuing promotions more aggressively. This can involve signing up for supermarket loyalty programs, or shopping at “On sale with a discount” shops.
In the post 1986 war period, our Dad would buy in bulk due to the prevalent scarcity then, and the steep prices that ensued. Smart consumers are managing the escalating high prices of food items and other essentials by buying in bulk, since no one know when the situation will normalize. This could involve going to wholesale hubs like Kikuubo, New Park, Kisenyi to buy at whole sale prices in bulk, since there are numerous discounts to enjoy as well.
Some households have had to cut out the luxuries from their budgets and commit the escalating scarce resources on the essential commodities. Realizing that you can do lesser beers every day, that saving could go a long way in covering the impact of the escalating commodity prices. Using public transport, rather than your private car, plus the reduction in the number of outings in high end hotels are other ways of attaining the much-needed saving.
Many times, purchases done as an individual do not attract the good or super deals. Noteworthy, households could consider doing group-based negotiations as they purchase essential commodities. This will not only enable them to access the good at the best prices possible, but also leverage on the group diverse expertise to achieve better quality of supplies.
True, flexibility and the ability to diversify commodities and services consumed gives the household greater ability to substitute the expensive sources of commodities with other sources, in the event that the prices spike. In some circumstances, it is possible to partner with dealers to suggest and even offer the viable options, from which to choose.
If a household is engaging in some economic activity, better to consider price increases to match the increasing prices in essentials, but not significantly to negatively impact the targeted customers. Even when many commodities are facing increases, these costs only represent a percentage of total costs, and should not negatively impact. As in the matter of fuel prices, the movement could be stochastic.
Purchases in advance with locked-in prices could change the tide. Although consumers should not rely on them exclusively, hedging strategies that transfer risk to counterparties in the markets can be of critical importance. A prerequisite, however, is for the consumer to have a valuable relationship with the seller, as a foundation for this deal.
We could consider pre-agreeing upon volumes for the long term, with pricing updated frequently as the market changes. This goes a long way in tying the contract prices to a market price for a particular class of commodities or underlying cost drivers. Using price indices to restrict price changes to a specified range and matching contract terms with those of the supply contracts can also help in mitigating this and allocating it fairly.
It’s important for all of us to stay vigilant and track changes in market conditions. In particular, we should watch for signs of any scarcity, fuel prices, occurrence of drought among others, that affect the pricing of commodities. While UBOS indicators can provide some sense of overall consumer spending, we need to apply feelers in the markets or even social media that shall give us those requisite indicators of an imminent price escalation. If the indicators are depictive of a progressive shift, then the households could relax on the tightening of their belts.
All will agree with me that if a price increase appears unavoidable in the prevailing market, and is backed up by reasonable facts, alternatives may nevertheless be available to minimize the cost increase’s effect by exploring new suppliers that could offer the same product or service at a slack. While this process will not be as immediate, a strategic review can help identify non-incumbent sellers or dealers for other areas who might be able to provide better prices for the products and services sought.
We need to support the poor in our communities. It should be very bad for us to watch others starve without making an effort to save them. No matter how big a nation is, it is no stronger than the weakest people. More than ever, the people endowed with plenty must support the have nots. That way, we would have fulfilled our creator’s call to support the needy. “Whoever is generous to the poor lends to the Lord, and he will repay him for his deed” Proverbs 16:19
Looking Ahead, as households continue to navigate financial pressures associated with inflation, it will be important, now more than ever, to work on building value-driven strategies. While it is challenging to address such quick and ever-changing shifts in inflationary pressures, it is not new. Households have an open opportunity to turn a lens inward and to reflect, establish or maintain values that resonate with their disposable incomes now and in the long term.
The writer is the General Manager Commercial Banking at Centenary Bank
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