In a surprising turn of events, OK Zimbabwe, one of the country’s largest supermarket chains, has implemented a new pricing strategy that offers significant discounts for USD payments while charging higher prices for transactions in Zimbabwe Gold (ZiG). This move marks a significant shift in the retail landscape and raises questions about the effectiveness of current monetary policies.

The New Pricing Model

During a recent visit to an OK supermarket, we observed this new pricing strategy in action. The supermarket is currently using an exchange rate of US$1 to $14.80 ZiG. We initially confirmed this rate by purchasing two loaves of OK Bread using EcoCash ZiG. The transaction showed a charge of $34.04 ZiG for two loaves priced at US$1.10 each. While this slightly exceeds the expected amount of $32.56 ZiG (based on the official rate), we attribute the difference to transaction fees.

However, the situation became more complex when we attempted to purchase a 500ml packet of Dendairy milk. An attendant informed us that the price for milk varies depending on the payment method. The official USD price for the packet is US$0.55. However, if one opts to pay using ZiG, the price doubles to US$1.10. At the till, we were charged $16.28 ZiG for this packet of milk, which, using OK’s shop rate of $14.80 ZiG per US$1, indeed translates to US$1.10.

This pricing model effectively creates a 100% premium for ZiG payments, a stark contrast to the official policy that mandates uniform pricing regardless of the payment method.

A Broader Trend

OK Zimbabwe is not alone in adopting this controversial pricing strategy. As we reported in our article “Insightful Mondays: Why Supermarkets Have Hiked Their Prices Again?”, other major retailers like FoodWorld have been implementing similar practices for some time. This trend suggests a broader shift in the retail sector’s approach to dealing with Zimbabwe’s complex monetary environment.

The Retailers’ Perspective

Recent communications from major retailers, including OK, TM Pick n Pay, and Halsteads, shed light on the motivations behind these pricing strategies. In a message to the government, these retailers warned that the current situation is “untenable” and could lead to company closures. They cite two main challenges:

Lack of access to foreign currency
Government demands to use the official exchange rate while suppliers are using rates of up to US$1 : 31 ZiG

To address these issues, the retailers have proposed two solutions:

Implementing discounted USD pricing
Shifting the Reserve Bank of Zimbabwe’s Financial Intelligence Unit from a “monitoring and punishment” approach to a “monitoring and advisory” role

These proposals indicate that retailers are seeking more flexibility in their pricing strategies to navigate the challenging economic landscape.

Historical Context

To understand the current situation, it’s crucial to consider the historical context of Zimbabwe’s currency issues. As we discussed in our article “Bread prices creep up in Zimbabwean supermarkets: A closer look at the latest trend”, Zimbabwe has a long history of currency instability and hyperinflation. The introduction of bond notes and subsequent transition to the ZiG have been attempts to stabilise the economy, but challenges persist.

The disparity between official and parallel market exchange rates has been a persistent issue, forcing businesses to adopt creative pricing strategies to remain viable. This new approach by OK Zimbabwe and others appears to be the latest iteration of these efforts.

Legal and Regulatory Considerations

The legality of this new pricing strategy is questionable. According to Statutory Instrument 127 of 2021, businesses are not allowed to offer discounts specifically for USD payments. The law mandates the use of the official exchange rate for all currency conversions.

However, enforcement of these regulations has been inconsistent, and the recent communication from major retailers suggests they are seeking changes to the current regulatory framework.

Impact on Consumers

This new pricing strategy has significant implications for consumers:

Those with access to USD can benefit from lower prices, effectively receiving a 50% discount compared to ZiG prices.
Consumers relying on ZiG face substantially higher prices, potentially exacerbating economic hardships for many Zimbabweans.
The strategy further incentivises the use of USD in the economy, potentially undermining efforts to promote the use of local currency.

As we noted in our August 2024 Grocery Basket report, supermarket prices have been on an upward trend, with staple foods seeing significant increases. This new pricing strategy could further complicate the cost of living for many Zimbabweans.

Conclusion

OK Zimbabwe’s new pricing strategy, offering discounts for USD payments and charging higher prices for ZiG transactions, reflects the complex challenges facing Zimbabwe’s retail sector. While it may provide some relief for USD-holding consumers, it raises serious questions about equity, legality, and the future of Zimbabwe’s monetary policy.

As the situation continues to evolve, it will be crucial for policymakers, businesses, and consumers to engage in open dialogue to find sustainable solutions that balance the needs of all stakeholders. At Zimpricecheck, we will continue to monitor these developments closely and provide updates as the situation unfolds.

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