Zimbabwe’s introduction of the Zimbabwe Gold (ZiG) currency has led to an 80% devaluation on the black market, creating severe challenges for formal retailers. With prices fluctuating dramatically and suppliers relying on black market rates, many retailers are compelled to make tough decisions that may lead to losses or drive away customers. The Retailers Association of Zimbabwe has pleaded for government reform to stabilize the currency and address the pressing economic volatility affecting their operations.
HARARE – Retailers in Zimbabwe have raised urgent concerns regarding the impact of the official exchange rate of the newly introduced currency, the Zimbabwe Gold (ZiG). Initially introduced in April 2024 as a strategic measure to combat inflation, the ZiG has experienced an alarming 80% devaluation on the black market, leading to increased price instability and the emergence of a dual pricing system. Major formal retailers, including well-known brands such as TM Pick n Pay, OK, and Edgars, conveyed their grievances to the Reserve Bank of Zimbabwe (RBZ), asserting that the current official exchange rate of US$1 to ZiG13.9 is both unsustainable and unrealistic. The Retailers Association of Zimbabwe (RAZ) has highlighted that instead of achieving economic stabilization, the ZiG is exacerbating price volatility and compounding difficulties for businesses. Many suppliers have begun to rely on the black market exchange rate, which is currently pegged at ZiG26 to the US dollar, for pricing goods and raw materials. This divergence in rates has led to significant operational challenges for formal retailers, who are now faced with either raising prices to mitigate financial losses or adhering to the official rate, risking losses of up to 50% per sale. In response to the pressure, some retailers have opted to disable their point-of-sale machines to bypass transactions in ZiG, while others report a growing trend of consumers favoring informal markets where the new currency is often rejected. Without governmental intervention to rectify the situation, the future of the formal retail sector hangs in the balance, with potential closures on the horizon. A notable example is the popular Boom washing powder, which is priced at ZiG102.45 based on black market influences, significantly higher than the official price of ZiG47.46. Retailers are caught in a precarious position; they must decide whether to absorb losses or increase prices in USD, thereby alienating their customer base. Local trader Mike Ncube has echoed the sentiments of many when 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 has urged the Zimbabwean government to permit the market to dictate the exchange rate, a plea for reform that has been voiced since 2016 after the introduction of bond notes, another currency that ultimately failed to maintain its value against the USD. Amidst the ongoing challenges posed by the ZiG, numerous retailers express profound concern that without immediate corrective measures regarding the exchange rate system, Zimbabwe’s economy may encounter further destabilization.
The introduction of the Zimbabwe Gold (ZiG) was intended to offer a viable solution to curb rampant inflation that has plagued Zimbabwe’s economy for years. However, the official exchange rate quickly became disconnected from its value on the black market, leading to dire consequences for formal retailers. As businesses grapple with rising costs and fluctuating currency values, the tension between the black market and official rates has resulted in a crisis for retailers operating legitimately. This situation has echoed much of Zimbabwe’s prior economic challenges, where numerous currency reforms have faltered and led to hyperinflation.
In summary, the situation surrounding the Zimbabwe Gold currency highlights significant challenges for retailers operating in Zimbabwe’s formal market as they navigate a landscape marked by erratic pricing and systemic volatility. The refusal to adapt the exchange rate in response to market realities could lead to continued economic decline, threatening the viability of formal retail businesses and leaving consumers with fewer options. Immediate governmental action is crucial to restore stability and protect both retailers and consumers from further repercussions.
Original Source: www.thezimbabwemail.com
