daniel chigunwe
Business Writer
Retailers are facing substantial losses due to the growing disparity between the official and black-market exchange rates, the Retailers Association of Zimbabwe (RAZ) has said.
RAZ, umbrella body that represents the interests of retailers, said the requirement to sell goods at the official rate was making it increasingly difficult for businesses to remain profitable.
It said the suppliers of good and services were offering dual pricing in local and foreign currency, with the latter’s implied rate significantly exceeding the official rate.
This is due to a shortage of foreign currency and volatile exchange rates on the black market.
“Suppliers of goods and services into the formal retail sector are now maintaining two tier price lists for local currency and another for foreign currency-whose implied rates are way higher than the obtaining Official Exchange Rate based on the banking system’s Willing Buyer – Willing Seller (WBWS) platform,” said RAZ.
“Our suppliers have expressed concern that they are faced with an acute foreign currency shortage and excessive volatility of ZiG exchange rates on the parallel/alternative market which has now become the basis of their pricing framework.”
The associations said the manufacturers and distributors were using variable exchange rates depending on their source of foreign currency. `While suppliers have the flexibility of adopting variable exchange rates, formal retailers are mandated to use the official exchange rate currently pegged at ZiG 14,8 to US dollar.
To avert massive financial losses, formal retailers have had to take “steep” US dollar price increases to generate revenues at the official exchange rate that would be commensurate with suppliers’ unit selling price into retail.
“This inevitably leads to real US dollar inflation creep along with many other economic and social ills as consumers shun formal retailers in favour of informal channels,” said RAZ.
It has recommended the authorities to implement a pricing model that reflected real-time market exchange rate fluctuations.
This keeps the official exchange rate constant while formal retailers offer differentiated discounted pricing by product to reduce inflationary impacts in US dollar terms, incentivise purchases and stimulate demand.
Bongani Ndlovu