Zimbabwe retailers warn of potential closures amid forex crisis
HARARE- Major retailers in Zimbabwe, including OK, TM Pick n Pay, and Halsteads, are sounding alarm over the unsustainable conditions created by a lack of access to foreign exchange and government mandates to adhere to the official exchange rate.
They describe the current situation, where suppliers operate at rates as high as US$1:31 ZiG, as “untenable,” warning that it could lead to widespread company closures.
The Retailers Association of Zimbabwe (RAZ), which represents a diverse group of companies including Truworths Edgars, SPAR, and FoodWorld, said RAZ members are compliant with local laws and contribute significantly to government revenue through various taxes while providing employment for nearly 20,000 Zimbabweans.
The umbrella body noted that the retail sector is grappling with dual pricing structures imposed by suppliers, who face severe foreign currency shortages and fluctuating rates on the parallel market. RAZ noted that this results in exorbitant pricing for goods when using the official exchange rate, creating substantial losses for retailers.
For instance, as of 16 September 2024, suppliers such as Schweppes and Irvines have shown stark differences between their local currency pricing and the implied rates based on parallel market valuations. The disparities mean retailers must absorb significant losses, with some products reflecting a loss of up to 48% when priced according to the official rate.
To address this crisis, RAZ has proposed two key alternatives. First, a _Market Determined Exchange Rate,_ which entails implementing a pricing model that reflects real-time market exchange rate fluctuations, helping retailers stay competitive while managing costs.
Second, RAZ suggests _Discounted Pricing,_ which would maintain the official exchange rate but allow formal retailers to offer differentiated discounted pricing by product, reducing inflationary impacts in USD terms and stimulating demand.
Additionally, RAZ has urged the Reserve Bank of Zimbabwe (RBZ) to permit discounted USD pricing and shift the Financial Intelligence Unit’s focus from “monitoring and punishment” to a more supportive “monitoring and advisory” role. Without these changes, RAZ warns that the future of the formal retail sector—and the livelihoods it supports—remains precarious.
RAZ’s statement comes as the Confederation of Zimbabwe Retailers (CZR) has attributed recent price increases and operational challenges, in the retail and wholesale sector, to a volatile exchange rate, power shortages, and strict regulatory crackdowns.
In a statement Friday, CZR President Denford Mutashu noted that the ongoing price hikes were a direct result of structural economic challenges.
“Most suppliers are demanding payment in a USD to ZiG ratio of 80:20, while others impose a heavy premium on goods sold in local currency,” Mutashu said. This mismatch has forced retailers to adjust their prices to align with USD equivalents, despite legal restrictions under the Exchange Control Act that prohibit pricing above prescribed rates when selling in ZiG. The exchange rate, which Mutashu described as “artificially fixed,” has further complicated business sustainability.
Mutashu also pointed to intensified regulatory crackdowns by the Financial Intelligence Unit (FIU), which has been targeting businesses that breach the Exchange Control Act. “The FIU crackdowns often overlook the operational realities faced by the sector,” he said, adding that the price hikes are not driven by profiteering but by the need to survive under harsh economic conditions.
Exacerbating the problem are the ongoing power shortages across the country, which have forced many retailers to rely on costly generators.
To address these challenges, the CZR has proposed a series of urgent reforms, including the liberalization of the exchange rate to allow market-driven pricing. “Retailers and wholesalers should be allowed to trade at market-related exchange rates, which will reflect the true cost of goods procured in USD,” Mutashu emphasized.
Mutashu warned that without immediate reforms, more businesses are likely to close, leading to further economic stagnation.
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