OK, TM Pick n Pay and other major retailers issue strong warning to RBZ, threaten to close their doors over ZiG

Zimbabwe’s leading retailers have issued a stark warning, threatening to close their doors if the Reserve Bank of Zimbabwe (RBZ) does not address the crippling exchange rate distortions plaguing the country’s economy.

In a joint statement released on Monday, major retailers including TM Pick n Pay, OK, Halsteads, Electrosales, Edgars and Metro Peach, voiced their deep concerns over the widening gap between the official exchange rate and the parallel market rates, which are being used by manufacturers to price their goods.

The retailers argue that they are caught in a difficult position, forced to use the official willing buyer-willing seller (WBWS) exchange rate of US$1 : ZiG14.8 to price their goods, while their suppliers are using parallel market rates that can reach as high as ZiG31 in some cases.

“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… 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,” the statement read.

The grouping on their part said the suppliers were also blaming acute foreign currency shortages on the official market.

The association said Schweppes for instance was selling Mazoe Orange Crush at US$3,48 or ZWG74,70 equivalent to a rate of US$1:ZWG21,45. Willowton is selling D’Lite Cooking Oil 2 litres at US$2,89 or ZWG67,08 equivalent to an implied rate of ZWG23,21.

Colcom Countrystyle 500g pegged at US$3,98 is being sold at  ZWG119,85 or an implied rate of  ZWG30,11.

Resultantly, the retailers said they are selling such products at a loss margin ranging between 10% to 48%.

The retailers highlighted the significant losses they are incurring due to this discrepancy.

“Being compelled by the central bank to use the official exchange rate to price their goods has caused them ‘massive losses’,” the statement said.

To mitigate these losses, retailers have been forced to increase their prices in US dollars, leading to a rise in inflation and discouraging consumers from shopping at formal retailers. “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,” the statement warned.

The retailers have proposed several solutions to address the crisis, including allowing the Zimbabwean dollar (ZiG) to float freely, which would create a “market determined exchange rate.”

“Implementing a pricing model that reflects real-time market exchange rate fluctuations can help us remain competitive while managing costs,” the companies said.

They also suggested that the RBZ should allow them to offer discounts to customers who pay in foreign currency, which would incentivize purchases and stimulate demand.

“This keeps the official exchange rate constant while formal retailers offer differentiated discounted pricing by product to reduce inflationary impacts in USD terms, incentivise purchases and stimulate demand,” they said.

Furthermore, the retailers are calling for a review of the RBZ’s financial intelligence unit, which has been enforcing the pricing measures. They believe the unit’s role should shift from “monitoring and punishment” to “purely monitoring and advisory.“

The retailers’ plea comes at a critical time for the Zimbabwean economy. Five months after its launch, the new Zimbabwe Gold (ZiG) currency is facing significant pressure, with increased grain imports depleting foreign reserves and putting the government’s plan to make it the sole currency in the market by 2026 at risk.

The ZiG, Zimbabwe’s sixth attempt at a stable currency in 15 years, was introduced in April at a rate of 13.6 ZiG per U.S. dollar. However, it has since lost almost 80 percent of its value on the black market.

The central bank has injected US$64 million into the foreign exchange market this month to address dollar demand, following a US$50 million injection in July.

Persistence Gwanyanya, a member of the RBZ’s Monetary Policy Committee, has stated that while uptake of the new currency has been slow, it is too early to declare it a failure.

A visit by our news crew to several supermarkets in the capital also revealed that products such as Sugar and Mealie Meal among others are no longer in stock in the ZWG-dominated retail outlets but readily available in the informal sector tuckshops where the US$ is readily available.

Some experts have blamed the authorities for injecting the ZWG into the economy without a proper mechanism to install easy access to the much-needed greenback in the high-import country.

Before its disbandment, the RBZ Foreign Exchange Auction went a long way to support local companies with their foreign currency needs.