Commodities vanish from shelves as forex rate spirals

SOME formal retail outlets have, allegedly, been withdrawing a selected number of key commodities from the shelves as the local economy battles with free-falling foreign exchange rates. Businesses have cited fears that if the foreign exchange rates (both formal and informal) continue to plummet at the obtaining speed, they will not be able to replenish their stocks.

In that regard, retailers have moved to peg prices steeply in the local currency, conscious of replacement costs while others are now pricing exclusively in United States Dollars (USD) for selected supplies as a way of survival from the runaway foreign exchange rate.

A snap survey in the Harare Central Business District found consumers buying groceries in bulk as they scurried to offload RTGS balances.

Notable products absent from the retail shops included the known brands of cooking oil, dairy products, cereals, and beverages, some shops were fully stocked with the products but pegged prices exclusively in US dollars.

On the contrary, some of these grocery items are being found plentifully on vendors’ stalls and downtown shops, as these selling points are magnets to the abundantly circulating US dollars.

Of late retailers have been complaining that suppliers now prefer selling to hawkers and runners who settle their obligations in USD compared to formal retailers who normally pay in RTGS.

Confederation of Zimbabwe Retailers (CZR) president, Denford Mutashu said formal retail channels had been caught unaware of the mounting foreign exchange rate and abrupt change in suppliers’ terms of conditions.

“The formal channel is the only channel that has continued to sell in US dollar and Zimbabwe dollar as obligated by law and this has brought a challenge with the replacement cost, hence retailers now fear to operate at a loss.

“ . . . because if you procure goods in US dollars, you lose out given how much the rate is going, you probably lose about 50 percent value of what you would have used to procure the stock, so it is a very difficult environment for the formal channel players,” said Mutashu.

“There has been a sudden change in terms of trading terms owing to the obtaining trading environment, because of the dollarised supply chain, the formal channel has not been in a competent position to procure goods exclusively in US dollars to pay upfront, that has caught most formal channels on the wrong angle of the market,” he added.National Consumer Rights Association (NACORA) spokesperson Effie Ncube said the economic environment was putting ordinary Zimbabweans in a tight spot, leaving them vulnerable to poverty.

“Goods are being willy-nilly removed from shelves, we suspect that some of them are withdrawing goods from the shelves so that they re-price to USD and that is very unfair for the consumers.

“While pricing in US dollar or hiking them in RTGS works for business it will be very difficult for consumers, because the majority of people in Zimbabwe earn the Zimbabwean dollar, and the skyrocketing exchange rates and business only accepting the USD makes life tough for them,” said Ncube.

The Zimbabwe dollar which was re-introduced by the RBZ in 2019 is facing widespread market rejection.

The local unit is incessantly plummeting against the USD in both foreign exchange markets. The foreign exchange rate reached an all-time low on Tuesday June 6, 2023 with the Reserve Bank of Zimbabwe (RBZ) weighted average rate closing at $3 674 to US$1, while the wholesale foreign exchange auction rate breached the $4 868 mark to the greenback as the central bank announced that it would from 7 June 2023 start selling foreign currency at the market-determined exchange rate through banks.

“This measure is calculated to ensure that the interbank forex market is the primary source for foreign exchange needs in the economy and that the foreign exchange auction system shall continue to operate for meeting smaller requirements for foreign payments and for continuous price discovery,” said the RBZ Governor Dr John Mangudya while announcing resolutions of the Monetary Policy Committee meeting held on 6 June 2023.

Renowned economist Professor Gift Mugano said the government should have implemented the policy measures way before the economic situation got out of hand as it currently stands.

“We are now implementing the right policies too late. We should have done this on 20 February 2019 when the interbank was introduced. This is too late! At this rate, wages, pensions, national budget and capital will be wiped out. Prices will hit the roof. It’s getting worse!,” said Mugano.

-ebusinessweekly