“2008 Gore Renzara” is bouncing back: ZiG Currency disaster as retail giants warn of collapse, big shops are closing

The spectre of 2008, a year etched in Zimbabwean memory for widespread hunger, scarcity of basic goods and economic devastation, is casting a long shadow.

The newly introduced Zimbabwe Gold (ZiG) currency, far from stabilising the economy, is instead triggering a fresh crisis, pushing the nation’s retail sector to the brink of collapse.

Major retail giants are issuing dire warnings, with reports of store closures already surfacing, painting a grim picture reminiscent of the hyperinflationary nightmare of two decades ago.

The Retailers Association of Zimbabwe (RAZ), representing major players including OK Zimbabwe, PicknPay, SPAR, Schweppes, Irvines, Probrands, Colcom, Edgars and Dendairy, and numerous others, has sounded the alarm.

The association’s statement paints a stark picture of an unsustainable business environment, directly linking the ZiG currency’s failure to the looming threat of widespread closures. The core problem stems from the government’s insistence on maintaining an artificially high, official exchange rate for the ZiG.

This creates a massive disparity between the official rate and the far weaker rate on the parallel market, making it impossible for formal retailers to compete.

Suppliers, facing acute foreign currency shortages and the volatility of the parallel market, are implementing two-tiered pricing systems. This means one price for local currency transactions and a significantly higher price for foreign currency transactions, effectively forcing formal retailers to inflate prices in US dollar terms.

This price inflation, in turn, drives consumers towards the cheaper, informal market, further strangling the formal retail sector. The RAZ statement explicitly warns that this situation is “clearly untenable and will lead to company closures if authorities do not intervene with policy measures to protect the formal retail sector.”

The government’s response to previous attempts to control the exchange rate has involved threats and arrests of those deemed to be flouting regulations.

In May, Reserve Bank of Zimbabwe (RBZ) governor John Mushayavanhu announced a crackdown on supermarkets and money changers, threatening to revoke licences and make arrests. However, economists argue that these measures are merely addressing symptoms, not the underlying problem: the flawed and unsustainable official exchange rate for the ZiG.

Economist Gift Mugano points out the fundamental failure of the command exchange rate system. He explains that the central bank needs to liberalise the exchange rate, acknowledging the difficulties but emphasising the urgent need for action.

“Before the ZiG was launched, it was supposed to build enough reserves. Now we are in a storm, and the right things must be done, but there isn’t enough ground for the liberalisation of the exchange rate to work,” he stated.

This echoes the concerns of other economists like Prosper Chitambara, who stresses the need for government engagement with retailers to address their concerns.

The widening gap between the official and parallel market exchange rates – with the US dollar trading at significantly higher rates on the parallel market than the official interbank rate – fuels fears of widespread rent-seeking behaviour and further instability.

The government’s claims of injecting substantial funds into the market to stabilise the ZiG appear to have had little impact, failing to halt the currency’s rapid decline. The parallel market rate continues to reflect the lack of confidence in the ZiG, mirroring the anxieties of the population.

The parallels with 2008 are striking. The economic hardship, the scarcity of goods, and the desperation of citizens struggling to make ends meet are all too familiar. The current situation, marked by the ZiG’s collapse and the threat of widespread retail closures, underscores the urgent need for a fundamental shift in economic policy.

Unless the government addresses the root causes of the problem—the flawed exchange rate policy and the broader economic mismanagement—Zimbabwe risks a return to the dark days of 2008, with potentially devastating consequences for its citizens.

The warnings from the retail giants are not mere business concerns; they are a stark reflection of a nation teetering on the brink of another economic catastrophe.