‘Schweppes selling mostly in Zimdollars’

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HARARE – Beverages maker, Schweppes Zimbabwe, says the bulk of its domestic market sales are being conducted in local currency while US dollars constitute only a small portion.

Chief executive Mr Charles Msipa said in an interview 85 percent of sales on the domestic market were being executed using the Zimbabwe dollars and the balance in forex.

He also said the company required US$1,5 million to US$2 million every month to import key raw material inputs, which at times created product supply gaps due to Covid-19 related logistical delays.

Such a scenario, Mr Msipa said, often resulted in hoarding of its most popular product, Mazoe Orange Crush, from wholesalers, especially by informal traders who then sell at higher prices in US dollars.

The remarks come against reports that some leading producers and suppliers of goods that are in high demand and require forex to manufacture were demanding payment in hard currency for key products.

Demanding payment in US dollars, which had become widespread amid an acute forex crunch and inflation surge in 2019/2020, goes against efforts by the Government to promote wider use of the Zimbabwe dollar.

The Government is pushing de-dollarisation of the economy following challenges related to use of the US dollar between 2009 and 2019, especially issues around supply of the currency.

Market reports say the culprits demand US dollar payments upfront (names withheld) include a major cooking oil producer, a wholesale chain with branches across the country and leading non-alcoholic beverages company.

This comes as many firms, including those that do not meet the auction system priority list, continue to face challenges securing forex to import key products.

“We continue to sell most of our products in Zimbabwe dollars. Most of our major retail customers sell in Zimbabwe dollars and also pay in local currency,” Mr Msipa said.

He said it was not Schweppes’ policy to demand payment exclusively in US dollars, even though the company sometimes faced forex challenges for key raw material inputs.

Schweppes Zimbabwe, Mr Msipa said, was also exporting to regional countries that include South Africa, Zambia and Botswana, where it also gets forex to complement funding it gets from the auction.

Zimbabwe continues to face forex shortages despite seeing record inflows in 2021 at US$9,7 billion, up 53 percent on prior year while foreign payments totalled US$6,99 billion, an increase of 45 percent.

Confederation of Zimbabwe Retailers (CRZ) president Denford Mutashu said some retailers were entering back office agreements with producers for payments in forex.

Usually, Mr Mutashu said, the arrangement resulted in the buyer paying significantly less in US dollar terms than they would if they paid using the Zimbabwe dollar.

Notably, he attributed this to limited availability of forex at the auction floor and said the practice reduced the traffic and pressure for limited US dollars from the auction.

“The practice is rampant and is informed by the requirement to source foreign currency by corporates internally without having to increase traffic to the auction market.

“Quite a number of companies have resorted to that and you may also have realised that a number of products are no longer available due to limited availability of foreign currency.

“Some companies have stopped such lines and that is actually due to the currency situation obtaining in the market. This has been happening for a long time.

“So, it has been happening over a long time (mostly in the informal sector), just that now it has become more prevalent. The formal businesses are now trying to join the bandwagon.

“Things are getting increasingly difficult (for formal businesses to get foreign currency) owing to reduced US dollar sales in the coffers (from domestic sales).

“But the rest of the informal sector has been doing it, which is also the reason why the (informal traders) are preferred in terms of product allocation. In times of shortages, they are the ones that get the product,” he said.

But Mr Mutashu said if businesses could source forex internally, this would reduce the stampede for limited foreign currency from the auction, which has disbursed more than US$2 billion since inception in June 2020.