Zimbabwe’s informal economy is nothing if not resourceful. In a country where economic instability and currency fluctuations are the norm, those operating outside the formal system have become masters of adaptation, finding opportunities where others see only chaos. The latest example? Bread.

You read that right. The humble loaf of bread has become the unlikely star of a thriving black market trade, highlighting the ingenuity and opportunism that defines Zimbabwe’s informal sector.

Our team at Zimpricecheck recently conducted our routine Monday “pulse checks,” where we survey local shops to gauge economic trends for the week ahead. What we discovered was unexpected and somewhat alarming. In major supermarkets like OK and Pick n Pay, we observed an unusual sight: shoppers with trolleys piled high with bread, paying exclusively by card or “swipe” as it’s colloquially known.

At first glance, this might not seem newsworthy. After all, bread is a staple food. But the scale of these purchases and the consistency with which they were occurring piqued our interest. We decided to dig deeper.

The Bread Business

Currently, bread in Zimbabwean supermarkets sells for approximately $15 ZWG, equivalent to about US$1 at the official exchange rate. However, these traders are not buying to consume. Step outside these same supermarkets, and you will find makeshift stalls and pushcarts selling the very same bread for US$0.80. This begs the question: who would buy bread for US$1 only to sell it at an apparent loss of US$0.20 per loaf? On the surface, it seems like a loss, but there’s a clever strategy at play.

The Currency Exchange Trick

The answer lies in the complex web of Zimbabwe’s dual currency system and the stark differences in how the formal and informal sectors handle the ZWG. The informal sector in Zimbabwe operates at vastly different exchange rates, often between ZW$22 and ZW$28 to the US dollar, with ZW$26 being the common rate. Here’s where the profit lies:

Traders are effectively buying bread at $15 ZWG/26, or about US$0.58 per loaf.
By selling for US$0.80, they are making a profit of US$0.22 per loaf.
They can then sell this US currency on the black market at rates of $26 ZWG or even $28 ZWG per dollar, further increasing their profits.

This exchange rate “jujitsu” allows traders to exploit the gap between official and informal rates, turning a modest profit with each loaf. Their strategy is further bolstered by the pricing structure of formal bakers, who wholesale bread to tuckshops at US$0.90 and retail at US$1. Naturally, cost-conscious shoppers opt for the US$0.80 bread offered by these savvy black market traders, ensuring a quick turnover of inventory and daily recovery of investment. This bread arbitrage not only proves more lucrative but also demands less capital and infrastructure compared to traditional bakery operations.

The Impact on Availability

The consequences of this trade are becoming increasingly apparent. Unless you are an early riser, chances are you will find empty bread shelves at your local supermarket. Many informal businesses have also jumped on the bandwagon, finding higher margins in this trade compared to ordering directly from bakeries. Most people are now buying their bread from these resellers who are conveniently located just outside the supermarkets.

A Deeper Look into Supermarket Operations

Our investigation uncovered some intriguing patterns. OK Supermarket’s popular “3 mini loaves for US$1” deal, a longtime customer favourite, has mysteriously vanished from shelves in recent weeks. When questioned, a baker at one branch claimed they were no longer producing these loaves. However, our early-morning visit to the store revealed a different story. We witnessed two individuals being ushered into the staff-only area, their trolleys soon emerging filled with bread.

Even more telling was our attempt to purchase bread using a card. Suddenly, all eight point-of-sale machines in the store – from various banks including Nedbank Zimbabwe, CABS, and FBC – were conveniently “offline.” Interestingly, black market traders using similar handheld machines just outside the same store had no such problems. It seems there’s a synchronised effort to prioritise certain transactions, possibly linked to the lucrative bread trade.

Challenges in the Formal Sector

When we attempted to purchase bread at a local Bakers Inn outlet, another twist awaited. Although they accepted both USD and ZWG Cash, the swipe machine was conveniently out of order. A manager explained, with an apologetic smile, that it was being charged. Apparently the staff forgot to charge it the previous night and it was being charged at the back. We strongly suspect it would only be fully “charged” only once bread stocks were depleted.

Insights from the Bread Industry

Curious about the scarcity, we reached out to a marketing executive at one of Harare’s largest bread manufacturers. Surprisingly, they reported no supply issues, confirming steady distribution to supermarkets. This further indicates that the shortage is driven by the activities of informal traders rather than production problems.

Conclusion

The bread hoarding phenomenon highlights the complex dynamics of Zimbabwe’s informal economy and currency market. Traders have ingeniously adapted to exploit exchange rate discrepancies, impacting both availability and pricing.

As this trend continues, it underscores the challenges faced by consumers and the need for more stable economic policies. For now, bread remains more than just a staple; it’s a currency in its own right, fueling a thriving black market.