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ZIMBABWE businesses are risking their survival by succumbing to market forces that have led to an unjustifiable rise in the prices of goods and services.

Despite the stable adoption of the Zimbabwe Gold (ZWG) currency in April, economists and policy-makers have accused some established businesses of pushing up their prices beyond reason, leading consumers to seek cheaper alternatives in the informal sector.

This comes as consumers have recently expressed concern over the violations of exchange regulations, with some big business players refusing ZWG transactions, limiting purchases in local currency, while some retailers have hiked prices in US dollars, but maintain the official exchange rate of US$1:ZWG13,8 as a pretence of compliance.

This trend has fuelled informality, leading experts to suspect that some big businesses are intentionally sabotaging the economy.

The Government has threatened to take action against such businesses as a measure to protect consumers and maintain stability.

However, some formal retailers have cited exchange rate disparities between US dollars and the ZWG as the cause of their high prices, claiming to be receiving only 20 percent of their forex needs through the interbank market.

The Government has introduced regulations to limit such unreasonable practices and prevent informalisation.

The disproportionate price differences between the formal and informal sectors, which is sometimes double the margin, has been blamed for fuelling informality amid suspicion that some big businesses could be conniving to sabotage the economy, analysts have said.

The Government says it will take  tough measures and promised to investigate such malpractices while announcing refined interventions to maintain  stability and protect ordinary consumers.

A snap survey conducted this week confirmed intense competition for clients between formal and informal businesses with prices of basic goods in formal shops being on the high end of the ladder compared to informal players, who only sell in forex.

A 10kg bag of roller meal, for instance, is sold for between US$8 and US$10 at big shops compared to US$5 and US$6 by vendors and small shops in town. 

Whereas a 2-litre bottle of cooking oil sells for US$4,50 to US$5,50 in big shops, the same goes for US$3 in the informal sector.

A 2kg of washing powder ranges from US$7 and above in big shops compared to an average US$3,50 in the informal sector while two litres of Mazoe goes for US$5 to US$8 in big retailers compared to US$4,50 in tuckshops.

The price range for a 2kg of rice is almost double at US$3,50 economy brands compared to US$1,80 to US$2 at small shops. A 500ml pint of fresh milk is sold almost at US$1 or equivalent in ZWG at big shops compared to US$0,50 in the informal market. Other basic products like washing bar soap, bread, toothpaste, petroleum jelly and others also showed a wider pricing margin with vendors being the cheapest.

While industrialists have complained about unfair competition by informal players based on the perceived high operating costs incurred by established businesses, analysts have chided the prevailing market indiscipline and its adverse impact on formal businesses.

The Treasury has also noted the disturbing trend and vowed to adopt swift measures to deal with malcontents.

“Indeed, this is what is happening in the market by some unscrupulous businesses, not all of them, but we are taking note and will act decisively. But remember, we need to consult and do so in a manner that does not disrupt the acceptance and performance of the ZWG so far,” Permanent Secretary in the Ministry of Finance, Economic Development and Investment Promotion, Mr George Guvamatanga, told ZBCtv news.

“I can tell you, there is no reason why the ZWG should be devalued because it is backed by gold and foreign currency reserves.”

Confederation of Zimbabwe Retailers (CZR) president, Dr Denford Mutashu, said while they do not condone lawlessness by business, formal retailers and wholesalers were being adversely affected by exchange rate disparity between the official rate of US$1:ZWG13,8 and parallel market rate of nearly US$1:ZWG25.

“Limiting quantities in ZWG is a way of managing speculators who are coming to the store to wipe stocks off shelves in ZWG and sell them in US dollars in the informal market. We also have suppliers preferring settlement strictly in US dollars citing shortage of forex from banks,” said Dr Mutashu.

Prominent industrialist and United Refineries Group chief executive officer, Mr Busisa Moyo, indicated the challenges faced by formal businesses due to informalisation and blamed weak enforcement of by-laws.

Economist, Dr Prosper Chitambara, said the challenge was that many businesses were unable to access enough foreign currency through the interbank market, receiving only around 20 percent of their forex needs.

This, he said, forces them to sell goods in US dollars to meet their import requirements, further contributing to the challenges faced by formal retailers.

“The challenge is that there is a huge mismatch in terms of the demand for US dollar and the supplier on the interbank market so most shops are not accepting the ZWG, especially for commodities that they are probably also importing,” said Dr Chitambara.

“Then, of course, for tuck shops, the informal economy by its nature has almost 100 percent dollarised but formal retailers can’t fully dollarise. So, what some are doing is that for some commodities, probably with a high import content, they are refusing to accept the ZWG.”

Dr Chitambara suggested that on the interbank market there are more willing buyers of foreign exchange than willing sellers.

“So, it’s creating a mismatch, which is causing businesses to then sell some of their products in US dollars as a way of meeting their own import requirements,” he said.

Zimbabwe National Chamber of Commerce (ZNCC) vice president, Mrs Josephine Takundwa, described the practice of capping the number of goods sold in ZWG as a personal decision by some retailers aimed at curbing speculative hoarding. She cautioned that such practices could fuel market distortions and undermine confidence in the local currency.

“This practice is not encouraged as it fuels distortions in the market and gives an impression of a shortage of goods under production. Retailers are encouraged to accept the ZWG as denying it only serves to erode the confidence we are working so hard to build with regards to having our own currency,” said Mrs Takundwa.

The Reserve Bank of Zimbabwe (RBZ)’s Financial Intelligence Unit (FIU) recently established a hotline for reporting businesses that reject the local currency or use black-market exchange rates.

The Government has also introduced fines for those found flouting the exchange rate regulations.

Industry and Commerce Minister, Mangaliso Ndlovu, said the ministry’s position on businesses engaging in unscrupulous practices would be established after further investigations.

In May, the Government promulgated Statutory Instrument 81A of 2024 to enable it to punish those found flouting the exchange rate.

Under these regulations, individuals and businesses found charging goods beyond the RBZ gazetted exchange rate are liable to a fine of ZWG200 000.

Presenting the mid-term monetary review in Parliament in June, Finance, Economic Development, and Investment Promotion Minister, Professor Mthuli Ncube, said there has been significant progress in the phased de-dollarisation programme, aimed at re-establishing a mono-currency regime supported by a domestic currency to enhance local production and competitiveness in exports.