THE Retailers Association of Zimbabwe (RAZ), an amalgamation of the country’s biggest retailers, has weighed into the exchange rate conundrum that has threatened to wipe away the sector.
In submissions to Treasury, the association, whose membership include Zimbabwe Stock Exchange-listed firms, warned the sector was virtually on the brink which puts the country in a difficult situation since the constituency pays taxes and directly employs over 20 000.
In its submission, it said suppliers of goods and services to the formal retail sector were maintaining a two-tier pricing regime for the local currency and United States dollar whose implied rates are way higher than the obtaining official exchange rate based on the banking system’s willing buyer willing seller.
“Our suppliers have expressed concern that they are faced with an acute foreign currency shortage and excessive volatility of ZiG exchange rate on the parallel/alternative market which has now become the basis of their pricing framework,” RAZ said.
The association’s cry comes amid massive financial losses which forced the constituency to make steep US dollar price increases to generate revenues at the willing-buyer-willing-seller exchange rate that is commensurate with suppliers’ unit selling price to retailers.
This inevitably leads to real US dollar inflation creeping along with many other economic and social ills as consumers shun formal retailers in favour of informal channels, it said.
If this happens, it will be akin to killing the goose that lays the golden egg as the informal sector is not tax compliant.
The retailers appealed for a pricing model that reflects real-time market exchange rate fluctuations which helps the sector to remain competitive while managing costs.
Their proposal includes being granted authority to undertake discounted pricing.
This, retailers said, kept the official exchange rate constant while formal retailers offer differentiated discounted pricing to reduce inflationary impact in US dollar terms which incentivises purchases and stimulates demand.
This proposal comes as US dollar revenue has dried up in formal retailers with customers offloading their local currency balances, capitalising on the overvalued exchange rate.
It also comes against the backdrop of a rise in premiums on the parallel market by more than half since the five-month-old Zimbabwe Gold (ZiG) was introduced in the country’s sixth attempt at introducing a stable currency in more than a decade.
Monetary authorities are literally living a lie, claiming that the sharp depreciation of the local currency experienced in the past two months is a result of speculation in what critics say is tantamount to hallucination.
The central bank says it has injected over US$100 million in two months to shore up the ZiG.
There is nothing to show for the injections as shortages persist on the formal market, forcing firms to source the US dollar on the parallel market.
The warning by retailers must be heeded as it cuts across all formal sectors that are under siege from the overvalued exchange rate.
Central bank officials appear to have no solution in sight, wallowing in the mistaken belief that they have ticked all the boxes to support ZiG.
It seems they ticked the wrong boxes.
