The viability of Zimbabwe’s formal retail and wholesale sector is under threat as more and more manufacturers and suppliers are now demanding foreign currency payments for their products.
Speaking at a retailer’s conference in Harare this week, Achie Dongo, director for N. Richards Group, said trading in Zimbabwe dollars is increasingly becoming uncompetitive. Said Dongo:
Where the Zimdollar is accepted, we tend as retailers and wholesalers to be subjected to forward rating and this forward rating on ZWL prices then makes the Zimdollar product uncompetitive.
This is a placement cost which is imperative in a hyperinflation environment, that is what is happening and we are feeling the heat as retailers.
… We will have no choice, but pass the cost to the consumer. So this is how dollarisation along the value chain from the producer manifests itself on formal shop shelves.
Dongo said the informal sector has an edge over the formal sector as it is subject to fewer regulatory restrictions and is better able to generate foreign currency locally. He said:
This gives them better product availability and pricing. The increased demands for forex payments for local transactions suggest growing reliance on forex sources other than the auction and the willing buyer willing seller.
As formal sector, our capacity to generate forex from this service is inadequate and this is because customers are not willing to transact through the interbank plus 10 percent rate that is in the market.
So we are constrained in terms of raising the forex when we face increasing demand for those forex payments.