A few weeks ago, the government dropped it’s latest bombshell yet in the form of Statutory Instrument 127 of 2021. The government says the instrument was crafted to punish those abusing the auction system but it goes beyond that. The law effectively forces businesses to use the official rate in all their dealings and ordered them to stop offering USD discounts. In the early days we noticed that informal businesses just shrugged and ignored the law while formal businesses complied. So decided to go around to see how certain businesses were doing.
We noticed that for the most part things haven’t changed. Informal businesses continue to refuse RTGS and only take Zimbabwean dollar notes at the black market rate of $120 ZWL per 1 USD. Their USD prices for this reason tend to be much lower than those of the big supermarkets. At Mbare Musika for example, peanut butter was selling for $2 for three 375ml bottles. In comparison in shops like OK, the price is almost US$2 for one 375ml bottle. The same applies to all products:
- Bally House 2l drink sells for US$1.50 in tuckshops but US$2.85 in OK thanks to the official rate
- Jade soap sells for US$0.50 in tuckshops but $US1 in supermarkets
- Cooking oil is going for US$3.20 in tuckshops versus US$4.50
- Sugar sells for $US1.80 in tuckshops against US$2.70 in big supermarkets
I could go on but you get the gist of it all. Thanks to being forced to both accept ZWL and use the official USD rate, the bigger supermarkets have no choice but to charge higher ZWL prices. Most arrive at the ZWL price by using the black market rate which is the rate at which they get foreign currency. They then put a premium in anticipation that the rate will go up and make most of their sales in ZWL. When no one is looking they then buy foreign currency at the black market using their ZWL.
What we observed
Big supermarkets have seen a massive drop in foot traffic. People just come in and do the maths using the rates obtaining at the black market. Unfortunately because they now have to go through the middlemen who gives them rates of say 120 ZWL instead of the 125 ZWL shops were offering via discounts, supermarket prices seem higher even when using black market rates. All the till operators we spoke to confirmed a massive drop in shoppers. A number of them were even fearful that they would be purged as supermarkets try to control costs.
A number of big supermarkets such as Gain have reverted back to the discount model. The people we talked to there said they had no choice. One of the Gain outlet we talked to is surrounded by tuckshops. The staff said they were barely recording any sales after complying with the rule. It was either defiance or shutting down. The tuckshops were so brazen sometimes when they ran out of stock they simply came to the Gain outlet swiped for the goods and handed them to a USD paying customer right in front of them. They were now using the Gain shop as their little warehouse.
Indeed a number of medium sized shops, even the formal ones, seem to have reintroduced the discounts. I asked some of the people there if they were not afraid of the steep fines promised by the RBZ. They said they were calling the government’s bluff. One manager made an interesting observation:
The government doesn’t seem to realise that these are our lives. If my shop fails my life is over. I have a parents, so does my wife. We have children who need to go to school. If I follow these rules who will take care of them? The government? They cannot even take care of our roads, hospitals and cannot even keep the lights on[probably referring to ZESA loadshedding].
They have been banned everything. Kombis- I had two kombis now that income is gone. They have been banning vending and chasing vendors,. They have banned mushika shika. They have banned importing ex-Japs. Banned mabhero (second hand clothes imports). It’s just ban ban ban ban for them but for me it’s my life.
I just have to take my chances. The police have their hands full the last thing on their minds is my little shop. They are busy enforcing all those other bans and chasing kombis they have very little for me. Besides I am friends with most of them. Even when new guys come I just sort them. I am more afraid of hunger than the police or toothless RBZ.A rant from one of the shop owners we spoke to
Other shop owners took exception at the fact that it seemed like government-linked entities were getting a pass. They pointed at Chicken Slice, Chicken Inn and similar joints who publicly continued to offer USD discounts. They were also not happy that they cannot find ZWL fuel anywhere even though fuel companies are beneficiaries of the auction. Where does all that fuel go? They probably sell it in USD too quipped others. I will stop demanding USD when Zuva stops one tuckshop owner shouted.
Big supermarkets will continue to suffer
Big supermarkets have targets on their backs and cannot violate the law. The government will simply make an example of them. The smaller outlets can probably get away with their usual practice. These are shops that have been refusing legal tender for years and this is just another law for them to ignore. Big supermarkets will continue to suffer and the staff there might even lose their jobs.