By Marshall Bwanya
Harare – Leading Zimbabwean retailers issued a stark warning on Monday, stating that they could be forced to shut down due to severe exchange rate distortions and stringent enforcement measures imposed by the Central Bank.
Retail giants including Edgars, OK, TM Pick n Pay, Metro Peach and Electrosales highlighted the discrepancy between the official exchange rate and the parallel market rate used by manufacturers.
In a Monday statement under the umbrella organization Retailers Association of Zimbabwe (RAZ), the companies lamented the discrepancy between the exchange rates used by manufacturers.
While manufacturers were utilizing variable exchange rates, the Reserve Bank of Zimbabwe (RBZ) was forcing retailers to use the official exchange rate based on the banking system’s willing buyer – willing seller (WBWS) system.
The official exchange is currently at US$1: ZiG14.8, and manufacturers are increasingly adopting parallel market rates, sometimes as high as ZiG31.
“Suppliers of goods and services into the formal retail sector are now maintaining two tier price lists for local currency and another for foreign currency – whose implied rates are way higher than the obtaining Official Exchange Rate based on the banking system’s Willing Buyer Willing Seller (WBWS) platform.
“Our suppliers have expressed concern that they are faced with an acute foreign currency shortage and excessive volatility of ZiG exchange rates on the parallel/ alternative market which has now become the basis of their pricing framework,” said RAZ.
Retailers said RBZ’s actions to compel them to use the official rate had caused them to experience “massive losses.”
In order to avert massive financial losses, retailers have had to take steep USD price increases to generate revenues at the WBWS Exchange Rate that would be commensurate with suppliers’ unit selling price into retail.
“This inevitably leads to real USD inflation creep along with many other economic and social ills as consumers shun formal retailers in favour of informal channels,” said RAZ.
The retailers said the situation was “clearly untenable and will lead to company closures if authorities do not intervene with policy measures to protect the formal retail sector.”
Retailers proposed several solutions, including a freely floating ZiG, foreign currency discounts and review of enforcement measures by RBZ.
The retailers’ proposals emphasized that the Reserve Bank of Zimbabwe’s Financial Intelligence Unit (FIU), currently responsible for enforcing pricing measures, should transition its role from punitive to purely advisory.
