Zimbabwean retailers warn that the official exchange rate of the newly introduced Zimbabwe Gold (ZiG) is economically unsustainable, leading to severe financial difficulties. Despite the government’s intentions to stabilize the economy, the rapid devaluation of the ZiG in the black market and dual pricing systems have placed retailers at risk of significant losses. Calls for a market-based exchange rate system have intensified as businesses struggle to adapt.
HARARE – Retailers in Zimbabwe have expressed urgent concerns regarding the official exchange rate of the newly introduced Zimbabwe Gold (ZiG) currency, which is reportedly driving them toward financial distress. Since its launch in April 2024, the ZiG has depreciated by 80% in the black market, resulting in significant price fluctuations and establishing a dual pricing framework that discriminates against formal retail outlets. Major retailers such as TM Pick n Pay, OK, and Edgars conveyed their grievances to the Reserve Bank of Zimbabwe (RBZ), emphasizing that the prescribed exchange rate of US$1 to ZiG13.9 is untenable, particularly as it positions the local currency at a higher value compared to the South African rand. Representatives from the Retailers Association of Zimbabwe (RAZ) articulated that although the introduction of the ZiG aimed to stabilize the nation’s economy, it has inadvertently intensified price volatility and compounded the difficulties faced by businesses. It was reported that suppliers have increasingly turned to the black market rate—currently at ZiG26 to the US dollar—when pricing goods and raw materials, rather than adhering to the official exchange rate. The retailers stated, “Our suppliers face a severe foreign currency shortage and excessive volatility in ZiG exchange rates on the black market, which has now become the basis of their pricing framework.” Despite the illegality of black market transactions, it has become the principal source of foreign currency for a multitude of businesses in Zimbabwe. Retailers find themselves at a crossroads, having to choose between elevating prices to bridge the gap or suffering potential losses of up to 50% per sale if they comply with the official rate. Many suppliers operate with dual pricing strategies—one for local currency and another for foreign currency—where the latter reflects substantially higher black market valuations. Some retailers have opted to deactivate their point-of-sale systems to avoid dealing in ZiG. Additionally, there has been a noticeable shift of consumers abandoning formal retail establishments in favor of those that illegitimately refuse to accept the new currency. Without sufficient governmental support, the formal retail sector warns that it may face widespread closures. A prominent illustration of the pricing disparity is the popular Boom washing powder, which has been marked at a black market-influenced price of ZiG102.45, in contrast to the official valuation of ZiG47.46. This has placed retailers in a difficult predicament: either to incur losses or increase prices in USD, thereby alienating customers. Local trader Mike Ncube remarked on the deteriorating situation, likening it to previous currency failures in Zimbabwe. He stated, “All the currencies introduced in Zimbabwe with the slashing of zeros and renaming of money have led to one thing—spiraling inflation. The government is backing their money with arrogance, not reality.” RAZ continues to advocate for a market-determined exchange rate. This appeal echoes sentiments expressed since 2016 when bond notes, another depreciating currency, were introduced by authorities. As formal retailers navigate the challenges caused by the ZiG, there is a pervasive fear that without prompt reforms to the exchange rate system, further destabilization of Zimbabwe’s economy could occur.
The Zimbabwe Gold (ZiG) currency was launched in April 2024 in an effort to control inflation in Zimbabwe’s struggling economy. However, the currency’s rapid devaluation—80% on the black market—has raised fears among retailers and consumers alike about economic stability. The present situation has created a scenario where formal retailers must contend with a fractured pricing system and varying exchange rates influenced by black market dealings, pushing many towards financial ruin.
In summary, Zimbabwe’s retail sector is grappling with severe challenges due to the devaluation of the Zimbabwe Gold (ZiG) currency, exacerbated by an unsustainable official exchange rate and rampant black market activity. Formal retailers are at risk of financial collapse unless the government intervenes to regulate the exchange rate system, as calls for market-driven pricing grow louder. The potential for economic destabilization remains a pressing concern without swift and effective reforms.
Original Source: www.thezimbabwemail.com
