Zimbabwe’s economic landscape has been a turbulent one, with businesses and consumers alike navigating a volatile currency and fluctuating prices. Here at Zimpricecheck, we keep a close eye on the cost of essential groceries, tracking prices in both major supermarkets and smaller tuckshops. Our recent survey revealed a concerning trend: while prices in USD-denominated tuckshops have remained relatively stable, supermarket prices, primarily set in Zimbabwe Gold (ZiG/ZWG), have seen a noticeable uptick, ultimately impacting USD prices as well.

We conduct two grocery price surveys each month, publishing the results here. Our surveys focus on essential grocery items. If you notice any vital items missing, please reach out to us via WhatsApp, and we’ll consider adding them to our next survey.

We typically avoid mentioning specific brands unless necessary, such as with bread. Our goal is to reflect the most commonly purchased options in each category, as most shoppers prioritise the type of product over the brand name—like not many people care whether it’s Red Seal salt or another brand. They just buy salt.

Our surveys cover the following supermarkets: OK, TM Pick N Pay, Spar, Choppies and FoodWorld. We generally cover at least 3 branches of each supermarket. Branches are selected based on distance from our current base of operations.

Staple Foods Feel the Pinch

The most significant price hikes were observed in staple starch products. Let’s compare last month’s average equivalent USD prices to this month’s:

Rice: 2kg of regular white rice, previously around US$2.50-US$2.80, now surpasses US$3.50. Premium varieties like Basmati and Jasmine rice have also climbed, with 2kg now exceeding US$5. Notably, 5kg of white rice brands like Ekono are now priced at US$9 (almost US$1.80 per kg), a significant jump from last year’s average of US$1 per kg, likely influenced by drought conditions.
Mealie-meal: The 10kg standard pack is nearing US$8, up from US$7 last month.
Macaroni: A 400g pack has risen from US$0.55 to US$0.75.
Cooking Oil: A 2-litre bottle now costs a hefty US$4.70, up from US$3.60.

Similar increases were observed in sugar, tea, bath soap, and washing powder. Interestingly, tuckshop prices for these same items remained largely unchanged, with some even experiencing slight decreases.

Addressing Counterfeit Concerns: We acknowledge the presence of counterfeit and underweight products in some tuckshops. Our price comparisons were conducted with due diligence, ensuring we compared genuine products of equal weight and quality.

Decoding Supermarket Pricing Strategies

While supermarkets might prefer pricing solely in the more stable USD, regulations necessitate dual pricing in both USD and the local currency (currently ZiG). This presents challenges as supermarkets often source foreign currency from various sources at different rates. Determining a fair and accurate conversion rate becomes complex, leading to discrepancies between official rates and the actual rates employed.

To mitigate potential losses and avoid accusations of profiteering, supermarkets have adopted a strategy of setting high ZiG prices and then converting to USD using a rate that appears compliant with official guidelines. However, our analysis reveals a different story.

Let’s take the example of cooking oil:

Last month: A bottle priced at US$3.60, with an official exchange rate of $14.80 ZiG per USD, should have cost $53.28 ZiG. However, knowing the tuckshop price remained stable at US$3.00, we can deduce that the supermarket employed an implied rate of $17.76 ZiG per USD ($53.28 / $3.00).
This month: The same bottle, now priced at US$4.70 using the same official exchange rate, translates to $70 ZiG. With the tuckshop price still at US$3.00, the implied rate used by the supermarket jumps to $23.33 ZiG per USD ($70 / $3.00).

This discrepancy between official and implied rates highlights a deliberate strategy employed by supermarkets to maintain profit margins while appearing compliant.

Factoring in Overheads: It’s important to acknowledge that supermarkets have higher operational costs than tuckshops, including rent, salaries, and generator fuel. Our research suggests that, on average, OK supermarket prices are approximately 10% higher than tuckshop prices, likely reflecting these overheads.

The Real Cost of Groceries in Zimbabwe

Adjusting for the 10% overhead difference, the implied exchange rates used by supermarkets in our analysis round off to approximately $17 ZiG and $23 ZiG per USD. These figures align closely with the prevailing informal market rates during our price surveys.

While we refrain from drawing definitive conclusions, the evidence suggests a strong correlation between supermarket price increases and the informal market exchange rates. This raises concerns about the efficacy of official exchange rate controls and their impact on consumer prices.

Frequently Asked Questions

Q: Why are tuckshop prices more stable than supermarket prices?

A: Tuckshops primarily operate in USD, a more stable currency than the fluctuating ZiG. Additionally, their lower overheads allow for greater price stability.

Q: Are supermarkets manipulating prices?

A: By law supermarkets have to accept both ZiG and USD. As a result, while not outright manipulation, supermarkets employ strategic pricing mechanisms, utilising implied exchange rates that differ from official rates to maintain profit margins.

Q: What can consumers do to navigate these price fluctuations?

A: Consumers can compare prices between supermarkets and tuckshops, opting for the most affordable options. Staying informed about market trends and exchange rates can also aid in making informed purchasing decisions.

Conclusion

The recent surge in supermarket prices for essential groceries in Zimbabwe highlights the complexities of a volatile economy grappling with currency fluctuations and inflationary pressures. While official exchange rates and store-published exchange rates paint one picture, the reality for consumers is often different. As we continue to monitor the situation, we encourage consumers to stay informed, compare prices, and advocate for greater transparency in pricing practices.