In their latest shock and awe move, the government of Zimbabwe dropped the bombshell that is Statutory Instrument 127 on Thursday. Just like all such statutory instruments, it doesn’t appear like businesses were consulted during the crafting and eventual release of the legal instrument. The document is the codification of the government’s grievance against businesses in Zimbabwe where it blames them of exploiting the gap between the official and unofficial exchange rates.
The biggest provision of SI 127 is that it orders businesses to use the official rate when calculating US prices. Businesses are also prevented from offering discounts when one pays in foreign currency provided the purpose of that discount is to encourage people to pay in foreign currency.
How Zimbabwean businesses have reacted to this?
Yesterday we visited several shops in and just outside Harare to establish how businesses would react to the order. Most large businesses were scrambling to comply. In Colcom along Coventry road, shop attendants rushed to remove the discounted USD prices they had been offering using an implied rate of US$125. One of the best seller item is their 5kg country sausage pack which sells for $ 3 875 ZWL and was selling for US$31.00 on Wednesday. Now shoppers were being told the item was now selling for almost US$47 almost 55% more. Angry shoppers were ditching items at the till forcing attendants to spent a better part of their time returning it to the fridges.
In the Texas Dairy shops on the same complex, it was the same story. The old USD prices had been removed and replaced with prices that used the official rate. A 5-litre container of Cortina ice cream was now going for a shocking price of US$9.50. There were no customers, in contrast to other days we have visited there. Cortina ice cream sells for almost half the price in informal tuck shops and on Facebook and sometimes informal vendors actually provide delivery.
The reaction was pretty consistent wherever we went. Big formal businesses now comply with the new law including big known wholesalers like Trade Centre and Mohammed Mussa. These businesses were now well known for their cushy USD discounts and now they are gone. On the other hand all the tuckshops we visited downtown and in Mbare were sticking to their guns. They seemed unbothered by the promised penalties.
While formal shops have been in a hurry to comply, informal businesses were unimpressed. Several attendants whom we talked too scoffed at the new measures. They pointed out to the fact that they source their own foreign currency at their own rates and it would therefore suicidal for them to use the official rate. That is hardly surprising. Even when the government banned the use of the US dollar in 2019, these shops simply brushed off the ban and continued to accept it.