Companies push to peg prices exclusively in US dollars

BUSINESS REPORTER

Local companies are pleading with the government to permit them to fix prices solely in United States dollars in order to maintain stability, Business Times can report.

The demand for the use of the US dollar is a result of the Zimbabwean dollar’s multiple declines, which have created some market uncertainty.

The government recently decided to keep the multi-currency system in place until 2030, using the greenback as the anchor currency.

Yet, companies worry that limitations on the use of US dollars still stand, such as the need for retailers, governments, and telecom providers to fix their prices in Zimbabwean dollars.

According to a number of business executives, setting prices in US dollars would increase certainty and predictability and draw in more foreign investment.

“The United States dollars allows for better planning and predictability of revenues or reward for goods and services,” said  Busisa Moyo, former president of the Confederation of Zimbabwe Industries.

Another executive, Ngoni Dzirutwe, the CEO of Global Renaissance Investments said: “When businesses charge in United States dollars ,they are less likely to raise prices in response to inflation.

“This is because the United States dollar is a stable currency, and its value is not subject to the same fluctuations as the Zimbabwean dollar.”

Dzirutwe added that fixing prices to the US dollar would remove the possibility of currency losses, which have posed a significant obstacle for Zimbabwean companies.

Several listed firms have in recent years suffered huge losses owing to exchange rate movements.

The telecommunications sector has been particularly hard hit by currency devaluation and inflationary pressures on the local currency.

This resulted in the Postal and Telecommunications Regulatory Authority of Zimbabwe (Potraz) director general Gift Machengete last month calling on the government to allow telecom operators to peg the rates in United States dollars, arguing that this would bring price stability and certainty to the sector.

The pegging of telecommunication tariffs in US dollars, according to economist Yona Banda, may strengthen network providers’ financial standing to handle growing operational expenses.

“This could help stabilise network issues under the current power supply challenges,” he said, adding that in the long-term, the sector would be more attractive for investors if the capacity of local consumers also improved.

“It’s more of a stabilising and securing effect, which is important. But the big picture outlook for the sector is largely tied to the general economic outlook, which is quite uncertain,” he said.

In addition to currency devaluation, telecommunication operators are also faced with power outages of long hours per day, forcing them to rely on expensive back-up diesel generators to keep the networks running.

The general lack of foreign currency to pay offshore equipment suppliers is also limiting investment, network upgrades and expansion across the industry.