TM is also known as Pick N Pay is offering up to 50% discount to shoppers who pay using USD cash. This means that for example if an item is selling for $1000 ZWL if you pay using USD you will end up paying the equivalent of $500 ZWL at the official rate. That seems shocking, massive and exciting at the same time but if you really look at the numbers you realise something-there are not making losses and are certainly not offering any real discount even though it seems they are.
The death of SI 127 of 2021
Earlier this year the government of Zimbabwe introduced Statutory Instrument 127 of 2021 which sought to prevent the sort of thing that Pick N Pay is doing. They wanted all businesses to continue to use the official exchange rate which is almost always much much lower than the official rate. Big businesses like OK and Pick N Pay would simply say they were using this rate but in order to remain competitive, they would offer discounts to customers who paid using cash USD. This allowed them to continue to compete with the so-called “downtown tuckshops” which sell exclusively in USD at rock bottom prices.
SI 127 sought to plug this loophole by making it illegal to offer discounts to those paying in USD. Normally shops do this for two reasons:
- To remain competitive as already mentioned above.
- So as to raise foreign currency without having to go through the black market or worse the official auction. Normally shops charge steep prices that factor in the premium of having to obtain foreign currency from the black market. On the other had customers have to sell their foreign currency to black market traders at a slight discount. These same traders then turn around and sell the foreign currency to the shops at a premium. Offering discounts mean that shops pay slightly less for foreign currency while customers get a slightly better rate. Both shops and customers cut out the middle man.
SI 127 for reasons nobody could fathom criminalised the discounts but even though it is still the law of the land people are ignoring it at a wholesale scale. For starters the “downtown tuckshops” never bothered to follow the law, to begin with. They continued to refuse ZWL and RTGS and demanded USD cash only most of the time. Most people don’t mind as these tuckshops sell at very low prices in USD terms. In recent weeks and months, we have seen more and more shops defying SI 127 and now the big shops seem to have joined in on the fun again.
The discount that is not a discount
So back to the purported 50% discount that Pick N Pay is offering. Why are we saying it’s not really a discount? Well, the devil is in the details. To help you understand let us tell you how big supermarkets arrive at the prices you see on shop shelves. An item that goes for $2000 ZWL would officially be selling for US$18.50 using the government rate of 108 ZWL per 1 USD. The truth though is that most shops obtain their USD from the black market. So when they are selling an item for $2000 ZWL it actually means they are selling it for about US$10. Behind the scenes, they know this and this is how they arrived at the $2000ZWL-they used the black market rate and not the official rate because again, most shops do not get their foreign currency from the government.
You can always confirm this is the case by looking at prices offered by the so-called tuckshops on the same items. They would be selling the item for around US$9-their prices are lower because their overheads also tend to be lower than those of tuckshops. So, yes the Pick N Pay discount is actually not a discount. It’s just them selling at black market rates like everyone else. The people that stand to lose the most from the arrangement are black market foreign currency dealers.
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