HARARE – Zimbabwe’s retailers warn that the official exchange rate for the country’s newest currency, the Zimbabwe Gold (ZiG), is pushing them towards financial ruin.
Introduced in April 2024 as a measure to control inflation, ZiG has quickly devalued by 80% on the black market, causing price instability and creating a two-tier pricing system. Formal retailers, including major brands such as TM Pick n Pay, OK, and Edgars, expressed their concerns to the Reserve Bank of Zimbabwe (RBZ) this week, stating that the official exchange rate of US$1 to ZiG13.9 – which values the local currency higher than the South African rand – is unsustainable.
Represented by the Retailers Association of Zimbabwe (RAZ), the retailers said that while ZiG was intended to stabilize the economy, it has instead fueled further price volatility and exacerbated challenges for businesses. Suppliers are reportedly using the black market rate to price goods and raw materials, where the exchange rate currently stands at ZiG26 to the US dollar, rather than the official rate.
“Our suppliers face a severe foreign currency shortage and excessive volatility in ZiG exchange rates on the black market, which has now become the basis of their pricing framework,” the retailers said in their submission to the RBZ.
Though black market trading remains illegal, it is the primary source of foreign currency for many businesses in Zimbabwe. Retailers are now caught between hiking prices to cover the gap or facing potential losses of up to 50% per sale if they adhere to the official exchange rate. In many cases, suppliers maintain two separate price lists—one for local currency and another for foreign currency, with the latter reflecting the much higher black market rates.
Some retailers have resorted to turning off their point-of-sale machines to avoid selling goods in ZiG, while others have seen consumers abandoning formal stores in favor of those illegally refusing to accept the new currency. Without adequate protection from the government, the formal retail sector warns of potential closures.
A key example is the popular Boom washing powder, which wholesalers are selling at a black market-influenced price of ZiG102.45, instead of the official rate, which would price it at ZiG47.46. Retailers face a tough choice: sell at a loss or mark up the price in USD, driving customers away.
Mike Ncube, a local trader, echoed widespread concerns about ZiG’s trajectory, comparing it to Zimbabwe’s past currency failures. “All the currencies introduced in Zimbabwe with the slashing of zeros and renaming of money have led to one thing—spiraling inflation,” said Ncube. “The government is backing their money with arrogance, not reality.”
RAZ has urged the government to let the market determine the exchange rate, a call that has been echoed since 2016 when the authorities introduced the bond note, another currency that failed to hold its value against the USD.
As formal retailers continue to grapple with the challenges posed by ZiG, many fear that without swift action to reform the exchange rate system, Zimbabwe’s economy could face further destabilization.
Source: News24