While the RBZ’s Official rate has barely moved with very tame increases over the past two weeks, the black market rate has been going crazy. First, it breached the $100 ZWL mark in December, the went over $110 ZWL at the beginning of the new year. Then it was 120 ZWL not long after that. Over the past month, it flirted with breaching the $120 ZWL mark but never did. Until this weekend when we saw several dealers paying around $130 ZWL.

You read that right. Dealers are actually paying this much for swipe and internal transfers according to our observations in the market. This means that when they start selling they will be asking for even more than this. If the trend continues the gap between the official rate and the unofficial rate will begin to grow to the levels we saw in 2019 and at the beginning of 2020 before the auction was introduced.

When we went to Mbare Musika we also saw that while some dealers were still paying a rate of $100 ZWL cash per 1 USD, most were now paying $110 ZWL cash per 1 USD. This is the rate that most informal traders are now using and paying using $100 ZWL in lieu of $1 USD is no longer accepted. Vendors didn’t have an explanation and those we asked said they were simply following the dictates of the market as this was the rate that everyone was using.

Big supermarkets like OK were still using the official rate of just under $84 ZWL per 1 USD although we observed that their cash tills were now handling more ZWL cash with little to no USD. That’s only to be expected as most people would simply exchange their USD for ZWL outside before walking into the supermarket. It would be simply foolish to accept such low rates and miss out on deals because of it.

Despite big supermarkets officially using the official rates when receiving payment quick calculations will show that they are also using steep black markets when charging their prices. Consider for example the price of cooking oil and roller meal. Cooking oil is going for just under $400 ZWL per 2-litre bottle and mealie-meal is going for almost $700 ZWL per 10kg. In comparison, cooking oil goes for about US$3.40 and mealie-meal for US$5.50. Do the math right and you will get rates of around $125 ZWL to 1 USD. That’s not a coincidence.

Shrewd big sellers have now cleverly introduced discounts that allows them to vacuum USD from buyers. For example Food World’s Trade Center has an effective rate of about $115 ZWL per `1 USD. Thanks to this half the shoppers in there are paying using USD cash. The shoppers know the rate is on par and sometimes higher than the one being paid on the street where dealers sometimes underpay the elderly who might not be aware of prevailing black market rates.

A fixed rate by another name

We were sceptical when the auction system was introduced given the way it operates. Fortunately, we were proven wrong for the past half-year but the weaknesses of the system are now being exposed. The RBZ’s hand leans heavily on the scales and this has had the effect of keeping the rate low even when it means precluding other people who want foreign currency from the system.

The RBZ still refers to a forex priority list. That is all very noble, a runaway rate has a way of excluding certain essential services from getting foreign currency. Take for example companies like ZESA that have no control over what they charge customers. They would not be able to access foreign currency without the help of the government.

However every week we see that certain bids from companies and SMES have been disqualified. These entities are probably just turning to the black market in order to quench their thirst rather than slink away to die. What they want to spend the money on might not be essential in the eyes of the RBZ but it sure is essential to them.

The result has been a rigged foreign currency auction system designed to keep the rate low rather than fairly compensate those who earn the foreign currency. The rate is all but fixed given the way it has been moving. There is also the issue of individuals who still cannot obtain foreign currency officials. These and informal businesses that just reopened are also turning to the black market instead.

It’s as if the RBZ and authorities have learnt nothing over the past few years or even decades.