Zimbabwe companies in cut-throat race to mop up US dollars

HARARE – From discounted prices for US dollar purchases to promotionals, giving more for less… Zimbabwean companies are having to dabble in cut-throat initiatives to prop up their hard-currency sales in light of the impending festive holidays.

Consumers such as public servants who have just been paid their 2021 annual bonuses in foreign currency have some additional buck to spend.

December is also one of the traditional high-volume months for remittances and in spite of the resurgence of the Covid-19 pandemic, some diaspora Zimbabweans are still planning to travel back home for the festive season, bringing with them some more liquidity. Remittance receipts have leapt to more than $1 billion (R15.8bn) in 2021, and some retail outlets now allow remittance receipts through their outlets.

And now Zimbabwean businesses and companies are coming up with all sorts of initiatives to snap up a bigger portion of this extra buck in the pockets of some Zimbabweans. This comes as the free-falling Zimbabwe dollar continues to struggle and to pose difficulties for supply procurement.

“The resources from the foreign currency auction are inadequate and there is no guarantee that the money allocated will come on time. So, we come up with initiatives to swab as much as we can in foreign currency sales because that then helps the company to re-stock without having to spend much getting foreign currency from the unofficial currency markets,” a finance manager with a large Zimbabwe retailer told Business Report.

This has seen retail operators in the quick-serve restaurant business come up with promotionals. Supermarket chains such as OK Zimbabwe are also giving discounts for purchases in foreign currency.

OK Zimbabwe and its major rival, TM Supermarkets – in which South African grocer Pick n Pay has a significant stake – face intense competition from unofficial and informal retailers that have lower overheads among other cost bases. Some of the informal traders operate from just in front of the store outlets.

“We are in a race for the same customers, and although the supermarket is big and we have smaller stock, it is the lower prices we are able to offer that sometimes sway shoppers bound for the big stores to opt for us,” noted Farirai Gavhera, just after serving a few groceries to a middle-aged woman clad in a nursing uniform in front of a retail outlet in central Harare.

The race to raise sales in foreign currency has also seen telecom operators, Econet and state-owned NetOne coming up with specific US dollar- denominated top-up cards that give extra talk-time and data. This is aimed at giving extra value to subscribers while also bagging much-needed foreign currency to cover for vendor and license financing.

Beverages manufacturer, Delta Corporation too is also running a promotion that gives four small soft drinks for $1. Analysts say this is a response from intensifying competition from Varun Beverages, the manufacturer of Pepsi products in Zimbabwe.

Analysts at IH Securities believe that Zimbabwean retailers such as OK Zimbabwe will benefit from “seasonal demand and increased consumer liquidity” which is expected to “spur sales”, and most likely foreign currency revenue. However, downside risks related to spiking Covid-19 cases which may pre-empt reduction in trading hours and possible escalation of lockdown measures remain.

Zimbabwe has projected a 5.5 percent economic rebound in 2022, driven by mining, manufacturing and agriculture, among other sectors.

In the telecoms sector, IH Securities say in a note on Econet Wireless that “foreign exchange losses are going to decrease” for the company although “cash flow is going to be impacted by the replacement of obsolete” assets, as the company upgrades its network and equipment.

Zimbabwe Finance Minister Mthuli Ncube emphasised that “both the US dollar and RTGS are transaction currencies in our economy”, as criticism grew for the government to fully dollarise.

Volatility of the Zim dollar has resulted in inflationary pressures on Zimbabwe’s economy, prompting the treasury to resolve to pay public servants bonuses in foreign currency, with the Reserve Bank of Zimbabwe recently projecting that inflation will close 2021 between 58 percent and 60 percent.

The Zim dollar closed at 1:108.6 against the US dollar at the last official foreign currency auction for 2021 on Tuesday.

“As government, whenever we see it fit, we do use one currency for a specific, chosen purpose if we are trying to achieve something. By paying civil servants’ bonuses in US dollars it was to deal with inflation,” Ncube said in response to questions from senators last week.