Industry, wholesalers pushing for re-dollarisation?  

13 Sep, 2021 - 00:09 0 Views
Industry, wholesalers pushing for re-dollarisation?   Reserve Bank of Zimbabwe

eBusiness Weekly

In an attempt to indirectly drive a re-dollarisation agenda a number of businesses, both manufacturers and retailers, are openly demanding US dollar payments for their products or peg the Zimbabwe dollar price for their goods and services so high to force customers to pay in hard currency.  

 

Investigations by this publication reveal that among the businesses engaging in a wide range of such unscrupulous practices are large corporations that get foreign currency on the Reserve Bank of Zimbabwe (RBZ) auction system.   

 

A leading wholesaler, name withheld, is reportedly demanding exclusive US dollar payments for certain lines of products, among them sugar, cooking oil, maheu and dairy products, in what market intelligence said could force unofficial dollarisation.  

 

Another prominent wholesaler, also named, accepts payments in both local and foreign currency, but sets its Zimbabwe dollar prices so high, at times double the cost in US dollars, to force its clients to settle payments in hard currency.  

 

Confederation of Zimbabwe Retailers president Denford Mutashu, confirmed receiving the reports of unscrupulous and rent seeking behaviour by a number of businesses, including some of the major beneficiaries of the central bank’s weekly auction system, where forex is very cheap.  

 

“We have received such reports and we are also engaging various companies that the market has complained about over such practices.  

 

“It is our duty as an association to remain responsible and to ensure that the market is also responsible to protect the interests of the consumers,” Mutashu said.  

 

 

But Confederation of Zimbabwe Industries CZI president Kurai Matsheza, tried to play down the matter. He said the CZI was not aware of any manufacturer demanding payments in hard currency, saying there was no collective industry position on the issue.   

He added that if any producer was doing that, it was an individual company’s position not shared by the majority.  

 

“I am not aware, we are not aware as CZI, we have not taken that position, if any companies are doing that they are doing that in their own interests,” he said.   

 

Matsheza also professed ignorance over alleged massive price increases, but pointed out that he was not dismissing the claim that some producers may have hiked prices by astronomical margins.  

 

“Again, I am not aware of any such massive price increases but I am not denying that it may have happened and as CZI we do not sit to set how prices are set by individual firms,” the CZI president said.  

 

However, market watchers indicated that many producers had recently increased their Zimbabwe dollar prices by steep margins, some by over 30 percent in just the last week, in a development likely to upset the downward trend in the rate of inflation.  

 

Zimbabwe’s annual rate of inflation maintained its downward trend last month, touching a new low in two years of 50,2 percent, after sustained increase saw the rate reaching a post dollarisation record of 837 percent in July last year.  

 

“There is serious confusion in the market and it creates a lot of uncertainty about where we are going as a country. As market players, this has affected us in a big way. There are products you never pay for if you do not have the forex.  

 

“These products include cooking oil, sugar, maheu-imagine maheu, why would one demand forex for maheu, how much imported input is used to make maheu. Then there are certain brands of soaps as well as dairy products,” the source said.  

 

Zimbabwe has continued to use a multicurrency system, which the country adopted in 2009 and commonly referred to as dollarisation, and authorities directed traders to display prices and accept payment in local and foreign currencies.  

 

The country reintroduced the Zimbabwe dollar in 2019 and although the domestic unit struggled for stability on introduction at $2,5/US$1 it has gained significant stability on the auction and currently trades around $86/US$1.  

 

However, despite the auction system having enforced marked stability of the local currency, as it now accounts for 30 percent of all external payments, the open market has continued to run and is blamed for causing serious pricing distortions in the market.  

 

Market players argue that while those not benefitting from the auction may be forgiven for the disparities in their pricing systems, it is baffling to understand why those consistently accessing foreign currency from the auction are abetting the pricing and payments madness.  

 

RBZ Governor Dr John Mangudya is on record several times, including in his mid-term monetary policy presented early last month, saying the auction is now the biggest source of forex for registered importers and key players in industry, having disbursed over US$1,7 billion since inception in June 2020.  

 

 

Sources, however ,said the practice of demanding payments in US dollars had become rampant within businesses, while in instances the producer or trader does not say it implicitly, but simply quote prices that are prohibitively high to force clients to use forex.  

 

“They simply give you a price so high that when you calculate you realise the price in RTGS could be twice the price in US dollars. Actually, there has been a wave of price increases by manufacturers as of last week and that wave is quite threatening and most of those large entities that have increased prices are the biggest players on the auction,” the source noted.  

 

The source, an industry executive, said the challenge now was the issue of confusion over whether the economy was redollarising unofficially or not, with key economic agents appearing to be running away from the unconditional use of local currency.

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