Retailers in Zimbabwe are further rejecting the Zimbabwean dollar by pricing their goods and services in US dollars amid a demand by government workers that their salaries be pegged to the US currency.
The first to fall foul of a government crackdown on the practice is Schweppes Holdings Africa through its BeitBridge Juicing Company, which produces the popular Mazoe orange juice.
On Monday, the government dealt the manufacturer a heavy blow by penalising the company for allegedly pricing and selling their drinks in US dollars.
In a letter to the company, the finance ministry’s secretary, George Guvamatanga, said his office had been informed about the claims. He said “pending the conclusion of investigations on your pricing model, the suspension of duty facility has been revoked”.
In his letter to the company, he said:
Under the cancelled arrangement, the company was allowed to import 10 000 metric tons of oranges and 5 000 metric tons of grapefruit.
The company will have to pay up to 15% tax on fruits and vegetables, as prescribed by the country’s import laws.
In December 2019, Schweppes’ US$10-million (R170-million) debt to the Coca-Cola Company, which supplies critical ingredients for the product, led to supplies being cut off, forcing a halt in production.
This happened at a time when Zimbabwe’s economy was already in recession and had contracted by 6%. Output dropped because of economic instability and the removal of subsidies on maize meal, fuel, and electricity, as well as suppressed foreign exchange earnings, the African Development Bank’s Economic Outlook said.
Schweppes wrote to the government revealing that it could not meet the demand and that for the first time, Zimbabwean families were likely to spend the festive season without their traditional cordial.
However, a last-minute bailout was approved, and the Reserve Bank availed the money needed, which was already in short supply.
“Mazoe is our middle-class product. Every family buys a bottle from time to time but when people can’t afford it anymore, it’s a tell-tale sign,” said Marks Moyo, a retailer based in Bulawayo.
While Mazoe has been singled out because most retailers sell it in foreign currency, other products such as milk, sugar and cooking oil are also pegged to other currencies in some supermarkets.
“Almost all suppliers want payment in forex (foreign currency), including those who give us vegetables, mealie meal, tomatoes, to mention a few products, because they get their inputs in forex,” added Moyo.
The Zimbabwe dollar is trading at ZW$850 to the US dollar on the parallel market, while it’s trading at ZW$375 at the official bank rate.
Retailers using the parallel market rate has made it hard for the Consumer Council of Zimbabwe (CCZ), an economic watchdog, to calculate the cost of living in the country.
CCZ spokesperson Christopher Kamba said:
With Mazoe retailing for about US$4 (R64), it is beyond the reach of most government workers. While the government says inflation for June was 191.60%, economist Steve Hanke from the Johns Hopkins University in the US, said Zimbabwe’s inflation for June was 472%.
Kamba said no one was following the country’s monetary laws.
“People are not in compliance with the market rate. People are using their own desired foreign currency exchange rates. We have not seen much enforcement of the interbank rate. The laws are there, the policies are there, but enforcement is lacking,” he said.
On Monday, the government stuck to a May proposal for a 100% increment for its workers, which the workers rejected last month.
Employees are demanding a salary of R14 000 for the lowest paid workers. Currently, with allowances added, the lowest paid government workers get around R2 800.
“As workers, we were not expecting such a position from the employer considering that the employer is cognisant of what is (happening) on the economic environment,” said Cecilia Alexander from the Zimbabwe Confederation of Public Sector Trade Unions.
At the time of publication, all unions representing government workers had agreed to hold a meeting to map a way forward. Sources said after the meeting, they would push for a nationwide strike.
With Zimbabwe set for general elections next year, University of London professor of political science Stephen Chan said the economy would play a leading role. He said as things stood, President Emmerson Mnangagwa could lose to his rival, Nelson Chamisa from the Citizens Coalition for Change. – News24
