Formal retailers poised for full dollarisation

LIVINGSTONE MARUFU

Local retailers are poised for full dollarisation amid a push by big supermarkets to peg the bulk of its products in US$, Business Times can report.

The pricing in US$ is in response to downtown tuckshops that were suffocating big retailers as they transacted in US$ only at a cheaper price.

It comes as formal businesses push to get the US$ required for retooling as the forex currency auction system cannot meet its requirements.

In a survey carried out by Business Times, retailers such as OK, Spar and Choppies have dollar pricing on some of their products.

Confederation of Zimbabwe Retailers (CZR) president Denford Mutashu told Business Times that formal shops have to swim or sink.

“We have to improvise, adapt and overcome to survive in this dog-eat-dog industry where you have to be stronger to be on top of the game. We have been suffering all along but we said to ourselves it’s a dual currency system we can price in US$ to remain relevant but there is a need for the monetary authorities to put incentives to make ZWL$ relevant,” Mutashu said.

The formal shops can use economies of scale to reduce tuckshops’ influence and dominance using the game of numbers which the informal businesses do not have.

A manager in one of the shops at Fife Avenue Shopping Centre who preferred anonymity told this publication that US$ pricing has levelled the playing field in the retail sector as the formal sector was getting its chunk of sales.

“After we saw an influx of tuck shops around our area, we improvised and did price surveys with our staff and came up with lower prices to attract more traffic into the shops so that we can survive.

“It was difficult to explain to our superiors how bad the business performed due to the untaxed competitors,” she said.

On Saturday, Spar Athenitis charged 2 litres of Orange crush at US$2.95 per 2-liter bottle, a 2-litre cooking oil bottle for US$4, a 2kg washing powder was pegged at US$4, and three 330ml coke drinks at US$1. This is against US$3.50 per 2litre orange crush, US$4.5 per 2litre, US$4.50 per 2kg of washing powder and US$1 per two 330ml cans of coke respectively in tuckshops.

“We can now walk into formal supermarkets without checking prices in tuckshops as shops are now cheaper in most aspects,” a customer known as Charles Muza said.

In its latest Inflation and Currency Development report, the Confederation of Zimbabwe Industries (CZI) said the country is heading towards full dollarisation.

“Zimbabwe is in a multi-currency regime and the policy stated goal is to move to a mono-currency regime. However, Zimbabwe is slowly but surely moving towards full dollarisation.

“While full dollarisation will completely eliminate persistent inflation challenges being faced by Zimbabwe, the cost of full dollarisation tends to outweigh the benefits. Some of the costs of full dollarisation include economic contraction, as the country migrates to a high-cost economy which will make it difficult for local firms to compete on the international market and curtail the central bank’s lender of last resort function as it might not be able to act to assist banks in distress and avert financial system crises,” CZI said.

“Full dollarisation would see the central bank losing monetary policy independence, especially the ability to influence the growth trajectory of an economy using the usual monetary policy tools and huge current account deficits as it becomes cheaper for economic agents holding US$ balances to import,” reads part of the report.