Since its launch in April 2023, Zimbabwe Gold (ZiG) has lost 80% of its value on the black market, leading retailers to declare that the government’s fixed exchange rate is detrimental to formal businesses. Major retailers are struggling with dual pricing systems, exacerbated by suppliers’ reliance on black market rates. The Retailers Association of Zimbabwe urges the government to adopt a market-based exchange rate to preserve the viability of formal retail sectors.
Since its inception in April, the Zimbabwe Gold currency (ZiG) has experienced a staggering decline of 80% in value on the black market. Retailers contend that the government’s insistence on maintaining an official exchange rate is adversely affecting their businesses, leading to increased price volatility that could potentially drive formal shops into bankruptcy. Major retailers, including South African brands such as TM Pick n Pay, OK, and Edgars, have expressed grave concerns to the Reserve Bank of Zimbabwe (RBZ) regarding the unrealistic and unsustainable official rate of US$1 to ZiG13.9, which does not reflect market realities. This situation exacerbates the volatility of ZiG as an attempt to stabilize the economy, revealing a disturbing trend of separating the formal market from more immediate and volatile black market conditions. Despite the intended purpose of ZiG to mitigate Zimbabwe’s soaring inflation, retailers report that it has instead induced a dual pricing system that undermines business operations. Suppliers are now forced to adopt two separate pricing structures for local currency juxtaposed with foreign currencies, leading to significant disparities and pushing shops to operate in terms of foreign hard currency. This strategic pivot occurs even as formal retailers struggle to convert transactions into the officially recognized local currency, often resorting to turning off point of sale machines for ZiG to avoid financial losses. For instance, the pricing of Boom washing powder exemplifies the gravity of the issue: while wholesale pricing based on the official rate would amount to ZiG70.60 for retailers, wholesalers are compelling retailers to pay ZiG102.45, effectively presenting another market rate far above the sanctioned exchange. Retailers’ frustration peaks as they face the dilemma of either raising prices and deterring customers or remaining stagnant and significantly reducing profit margins. As noted by Mike Ncube, a trader, the precedent established by Zimbabwe’s historical monetary policies presents a concerning trajectory; the new currency is marred by the same inflationary pitfalls as its predecessors. His insight highlights the disconnect between governmental rhetoric and the tangible realities facing businesses and consumers alike. The Retailers Association of Zimbabwe (RAZ) has thus called for a fundamental adjustment in government policy, advocating for a model that permits market-driven exchange rate determinations.
The Zimbabwe Gold (ZiG) currency was introduced in April 2023 as a governmental attempt to curb inflation and restore confidence in the national economy. However, it quickly faced criticism and skepticism due to its steep depreciation and the problematic official exchange rates maintained by the government. Retailers have reported heightened price volatility and significant challenges in sourcing goods, leading many to question the long-term viability of formal retail sectors amid economic instability. Past governmental currency reforms have contributed to public mistrust in local financial systems—indicating a historical pattern of failure that has influenced current perceptions of ZiG. The black market economy has become a pivotal element in business operations, challenging the effectiveness of legal frameworks.
In summary, the introduction of the Zimbabwe Gold (ZiG) currency has inadvertently led to increased hardship for formal retailers in Zimbabwe, as it exacerbates existing economic instability rather than alleviating it. The officials’ stubbornness in adhering to an unrealistic exchange rate only deepens challenges, ultimately jeopardizing local businesses. With historical context illuminating the persistent inflationary issues plaguing the country, calls for a market-responsive currency approach grow increasingly compelling as stakeholders strive for operational sustainability amid a fractured economic landscape.
Original Source: www.news24.com
