Zimbabwe economy looks set to implode

Motorists queue to buy petrol in Harare on Monday. Photo: Reuters
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HARARE – Zimbabwe’s economy is heading for an implosion, with parallel market rates bolting, prices spiking and shortages of foodstuffs and imported commodities emerging, leaving companies in a quandary on how to stay afloat.

On Monday, some shops did not open, while others removed goods from shelves as companies battled to keep up with the changing currency rates on which they base their prices. Measures to calm the jitters through policy announcements last week have not yielded any respite.

Businesses have called for the adoption of the rand, seeing it as the best way forward, as South Africa remained Zimbabwe’s major source market.

“The business environment has remained challenging, and for us to be able to fulfil your orders on demand and at good quality we have been left with no option other than to slightly adjust our prices by an average of 14percent,” said Dainboard executive Eunice Ganyawu.

Retail companies said they were removing goods to cover for potential losses as the parallel market pushed the US dollar bond higher over the weekend despite the government insisting that it had equal value to the bond notes.

The implosion comes a week after the Reserve Bank of Zimbabwe said it had taken measures to separate bank accounts earning forex from those earning local currency and introduced a two cents tax for each dollar transacted through mobile money and electronic payment platforms.

Fuel shortages worsened over the weekend despite the central bank saying it had released $41million (R609m) to import petrol and diesel.

The bank’s governor, John Mangudya, acknowledged that there was a widespread increase in parallel market forex rates.

Mangudya said the multiple currency system would remain while the bank was sourcing credit lines to supplement forex earnings from exports.

Pharmacists said they had hiked the prices of medicine by up to 40 percent, as they had to raise forex to cover for their imports from parallel markets.

Avenues Clinic Group, one of the major privately owned hospitals in the country, said it had “noted that some of our critical suppliers have already started charging in US dollars, or are not selling at all”, which had presented “a huge stock replenishment” risk on operations.