Disparity in exchange rate leading to shortages of basic commodities
By Letwin Mazarura
Basic commodities have started disappearing from shop shelves amid revelations several manufacturers have stopped supplying supermarkets and wholesalers owing to the government’s threat to deal decisively with businesses that fail to adhere to the policy on foreign currency rates.
Zimbabwe has been using parallel market rate resulting in prices of goods spiralling out of control due to currency crisis. The government described it as unjustified and added that ‘it has nothing to do with economic fundamentals’.
The exchange rate of the black market and the official rate have been too wide gapped with the black market rate being more than twice the official exchange rate.
Some manufacturers have since started limiting supplies to retailers and wholesalers.
It is understood they now prefer supplying downtown tuck shops that are paying in hard currency.
Confederation of Zimbabwe Retailers president, Denford Mutashu, said retailers were facing shortages of basic commodities.
“There are infant signs of shortages of selected goods in some shops owing to the exchange rate dilemma in the market,” Mutashu said.
The recent arrest of business leaders also translated to a situation where manufacturers are now displaying local currency prices but with no products while the same product will be made available to those paying in hard currency.
CEO Africa Roundtable chairman, Oswell Binha, said that the government was undermining its integrity through the introduction of legislations such as Statutory Instrument (SI) 127 of 2021.
Binha noted that there was a need for a genuine dialogue between business and the government to avoid dire consequences in the economy.
“Government continues to undermine its integrity. We are in a situation where the government is negotiating with business leaders but on the flipside busy incarcerating the same business leaders,” Binha said.
“This means we are going to see unintended consequences where people and businesses will end up outsmarting the system by dumping both the RTGS and the US$ and resort to barter trading and that is going to be a recipe for disaster.”
Economic analyst Victor Bhoroma said the enforcement of SI 127 of 2021 can only lead to heightened inflation in local currency and disappearance of imported merchandise in local shelves.
“Businesses or various economic players will not operate at sub economic levels or incur losses to comply with legislation. The SI is a form of price control and the retailers can only sell at a profit regardless of the law,” Bhoroma said.
Most suppliers at the moment have been supplying those customers that have been paying in hard currency and this means the retailers and wholesalers have been made to wait because they have been paying in RTGS.
This is also likely to trigger another shortage because the exchange rate matter and the loss of value in local currency have sent the whole industry into confusion.
A number of businesses are failing to access forex at the auction system forcing them to source the currency from the black market to restock.
Those that are lucky enough to access forex from the auction system take at least two months for the money to hit their accounts, a situation that has forced companies to source hard currency from the black market, where premiums are exorbitant .
The government recently gazetted SI 127 of 2021 which punishes businesses from selling goods and services or quoting them at an exchange rate above the ruling auction market rate.
The SI has resulted in the arrest of various retail players over allegations of manipulating the exchange rate as well as violation of exchange control statutes.
Since last week, several business executives have been arraigned before the courts facing various criminal charges for violating SI 127 of 2021.
Add comment