Harare — The Retailers Association of Zimbabwe (RAZ) has sounded the alarm over significant losses being incurred by formal retailers due to disparities in exchange rates used by suppliers and the official exchange rate mandated for retail transactions.
The association, which represents several major retailers operating in Zimbabwe, is calling for urgent intervention to stabilize the situation and prevent potential store closures.
A report released by RAZ highlights how manufacturers and distributorship suppliers are using variable exchange rates to price their goods, depending on their source of foreign currency. Meanwhile, formal retailers are mandated to use the official Willing Buyer-Willing Seller (WBWS) exchange rate, currently pegged at ZIG 14.8 to the US dollar, leaving retailers exposed to substantial financial losses.
The association presented a table illustrating the implied exchange rates used by suppliers as of September 16, 2024. For instance, Schweppes is selling Mazoe Orange Crush 2L at a ZWL price that reflects an implied exchange rate of 21.45, significantly higher than the official WBWS rate. Similarly, Colcom’s Country Style Sausage 500g has an implied rate of 30.41, and Boom Washing Powder 2kg from Exclusive Brands shows an implied rate of 30.13. The difference between supplier rates and the official WBWS rate is creating a widening gap, with retailers being forced to sell products at a loss to comply with official pricing regulations.
RAZ noted that retailers are bearing the brunt of this disparity, with losses ranging between 9% and 61% depending on the product. For example, Delta Sparkling’s Coke 300ml bottle, priced at ZWL 81.28 by retailers using the official rate, leads to a 55% loss, while Irvine’s chicken incurs a 37% loss. This untenable situation is causing significant financial strain on the formal retail sector, which already faces challenges in the current economic climate.
Retailers Exposed to Massive Losses
The data provided by RAZ details losses for a wide range of products across various sectors, from beverages to detergents. Retailers are being forced to absorb losses to comply with government regulations, with many products selling at below cost price when converted at the official exchange rate. For instance, Schweppes’ Mazoe Orange Crush is sold at ZWL 109.10 per 2L bottle, resulting in a 61% loss for retailers.
Irvine’s chicken, a staple in Zimbabwean households, is another product with stark losses. With a cost price of USD 5.90 and a retail price of ZWL 100.52, retailers are losing 37% of their value. Similarly, Exclusive Brands’ Boom Washing Powder 2kg incurs a 31% loss.
Urgent Need for Policy Reforms
RAZ has expressed deep concerns about the sustainability of the retail sector under these circumstances. “The situation is clearly untenable and will lead to company closures if authorities do not intervene with policy measures to protect the formal retail sector,” RAZ stated in its report.
The association is calling on government authorities to implement urgent policy interventions that would allow retailers to operate with more flexibility in their pricing strategies. Without such measures, the formal retail sector, which employs tens of thousands of Zimbabweans and contributes significantly to the national economy, could face widespread closures, further exacerbating unemployment and economic instability.
Looking Ahead
As the gap between the official exchange rate and parallel market rates continues to widen, RAZ is hopeful that the government will address the issue by allowing retailers to adjust prices in line with the costs they are incurring from suppliers. The association remains committed to working with the government to find a solution that ensures the sustainability of the formal retail sector while protecting consumers from price shocks.
With retailers under mounting pressure to navigate this challenging economic landscape, the need for swift policy action has never been more critical.