Retailers reel under weak ZiG

STAFF WRITER

Zimbabwe’s retailers are reeling from the forced usage of the official exchange rate, which they view as fixed, when pricing their products, a situation they believe is detrimental to their competitiveness, Business Times can report.

The Zimbabwe Gold (ZiG) was yesterday trading at ZWG14.80:US$1 on the formal market. It has, however, lost almost 80% of its value on the black market since its launch in April this year trading at between ZWG25:US1 and ZWG33:US1, an exchange rate that many suppliers use to price their products.

The Retailers Association of Zimbabwe (RAZ), which has large retailers such as Pick n Pay TM Supermarkets, Spar Zimbabwe, and OK Zimbabwe, the largest retailer in the country in its membership, wrote a letter to the Ministry of Finance, Economic Development, and Investment Promotion this week stating that the volatility has caused havoc in the industry as retailers are forced to sell their products using the official exchange rate for goods that suppliers have pegged in black market rates.

This scenario has forced retailers to hike prices.

If the government insisted on the usage of the official currency rate, the retailers have threatened to shut down their outlets due to the unstable situation.

“The situation is clearly untenable and will lead to company closures if authorities do not intervene with policy measures to protect the formal retail sector,” RAZ said.

It continued: “Implementing a pricing model that reflects real-time market exchange rate fluctuations can help us remain competitive while managing costs.”

The retailers said while they had to adhere to the official exchange rate as required by authorities, their suppliers are charging black market rates, forcing retailers to hike prices.

The retailers said although the government was forcing them to  use the official exchange rate , their suppliers  were charging  exchange rates  that were on the black market, a situation which was driving up prices for their goods.

The Confederation of Zimbabwe Retailers (CZR) president Denford Mutashu weighed in saying the situation was dire.

According to him, the current situation was unsustainable, and without significant  government intervention, there is a  risk of  more business closures and economic stagnation.

“The government’s Exchange Control Act’s rigid regulations and the Financial Intelligence Unit (FIU)’s crackdowns have created a high-risk environment for businesses,” Mutashu said.

 He added: “Many retailers and wholesalers are operating on a knife edge, forced to pass on increased costs to consumers.

 “Retailers and wholesalers should be allowed to trade at the market related  exchange rates. This will allow for fair pricing, as the cost of procuring in United States dollars can be better reflected in fuel prices, avoiding distortions created by the current fixed rate.

“Retailers and wholesalers are caught between the rock of a dollarised supply chain and the hard place of earning in Zimbabwean dollars.”

According to Mutashu, the government must encourage distributors and manufacturers to sell through official retail channels in order to maintain supply chain discipline.

“The government must ensure equal rules for all by enforcing consistent regulations across both the formal and informal sectors. It should also provide relief for fuel costs, either by offering fuel provisions in Zimbabwean dollars or removing fuel taxes for retailers,” Mutashu said.

He added: “We are not asking for favours, but for a level playing field.”