Basic commodities have started disappearing from shop shelves amid revelations several manufacturers have stopped supplying supermarkets and wholesalers owing to the government’s threat to deal decisively with businesses that fail to adhere to the policy on foreign currency rates, Business Times can report.
Zimbabwe is experiencing a runaway parallel market rate resulting in prices of goods spiralling out of control due to currency crisis, which the government described as unjustified, as ‘it has nothing to do with economic fundamentals’.
The US$ is pegged at ZWL$200 on the black market. The greenback is, however, trading at ZWL$90 at the Reserve Bank of Zimbabwe-run Dutch Foreign currency auction system.
Business Times can report that some manufacturers have since started limiting supplies to retailers and wholesalers. It is understood they now prefer supplying downtown tuck shops that are paying in hard currency.
Confederation of Zimbabwe Retailers president, Denford Mutashu, said retailers were facing shortages of basic commodities.
“There are infant signs of shortages of selected goods in some shops owing to the exchange rate dilemma in the market,” Mutashu said.
The recent arrest of business leaders also translated to a situation where manufacturers are now displaying local currency prices but with no products while the same product will be made available to those paying in hard currency.
CEO Africa Roundtable chairman, Oswell Binha, told Business Times that the government was undermining its integrity through the introduction of legislations such as Statutory Instrument (SI) 127 of 2021.
Binha noted that there was a need for a genuine dialogue between business and the government to avoid unintended consequences in the economy.
“Government continues to undermine its integrity. We are in a situation where the government is negotiating with business leaders but on the flipside busy incarcerating the same business leaders,” Binha said.
“This means we are going to see unintended consequences where people and businesses will end up outsmarting the system by dumping both the RTGS and the US$ and resort to barter trading and that is going to be a recipe for disaster.”
Economic analyst Victor Bhoroma weighed in saying the enforcement of SI 127 of 2021 can only lead to heightened inflation in local currency and disappearance of imported merchandise in local shelves.
“Businesses or various economic players will not operate at sub economic levels or incur losses to comply with legislation. The SI is a form of price control and the retailers can only sell at a profit regardless of the law,” Bhoroma said.
A survey by the publication discovered that there is an evident shortage of some basic goods in supermarket shelves.
Well-placed sources said most manufacturers or suppliers are demanding to be paid strictly in US$ by retailers and wholesalers.
This, multiple sources said, is triggering shortages on shop shelves.
“Most suppliers at the moment have been supplying those customers that have been paying in hard currency and this means the retailers and wholesalers have been made to wait because they have been paying in RTGS. This is also likely to trigger another shortage because the issue of the exchange rate and the loss of value in local currency have sent the whole industry into confusion,” said an industry source, who preferred not to be named.
A number of businesses are failing to access forex at the auction system forcing them to source the greenback from the black market to replenish stock.
Those that are lucky enough to access forex from the auction system take at least two months for the money to hit their accounts, a situation that has forced companies to source hard currency from the black market, where premiums are punitive.
The government recently gazetted SI 127 of 2021 which punishes businesses from selling goods and services or quoting them at an exchange rate above the ruling auction market rate.
The SI has resulted in the arrest of various retail players over allegations of manipulating the exchange rate as well as violation of exchange control statutes.
Since last week, several business executives have been arraigned before the courts facing various criminal charges for violating SI 127 of 2021.
There is an exchange rate dilemma in the market with four exchange rates prevailing. There is the auction exchange rate of ZWL$90:US$1, the ZWL$ swipe to US$ (ZWL$180:US$1), the ZWL$ mobile money to US$ (ZWL$200:US$1) and ZWL$ cash to US$ (ZW$165: US$1).
There is also a rate for nostro US$ and the rate, except the auction, changes more than three times per week.
This has created confusion on the market and extreme cases are when the supplier /manufacturer/tuck shop wholesale flatly refuses any other payment for goods and services except US$ cash which comes with discounts to entice the customer.
Business leaders are however, concerned by the recent clampdown on executives referring it to a case of history repeating itself where the government will be on the negotiating table with business but on the other hand incarcerating the same constituency.
On Monday this week, the RBZ governor, John Mangudya and finance ministry officials met captains of industry to discuss measures to curb the volatility of the parallel exchange rate.
The government affirmed commitment to support and fine-tune the auction system and also support the manufacturing sector by levelling the playing field.