It is a song that Zimbabweans have heard playing before: as the Zimbabwe dollar loses more value, shops are struggling to restock fast enough and the country’s biggest industry group wants brakes put on panic buyers.
As the gap widens between Zimbabwe’s formal and black market exchange rates, retailers are struggling to restock their shelves as manufacturers demand US dollar cash payments. Now the Confederation of Zimbabwe Industries (CZI) says there may be a need to temporarily restrict what shoppers can buy. Cooking oil purchases should be limited to two bottles per customer, and there must be a cap on the imports of basics.
“Limit importation of basic commodities to households on for domestic use (prescribed monthly quantities),” CZI says in proposals sent to government this week.
Because formal businesses are forced to use the official rate, which overvalues the Zimdollar, they are losing out to informal traders, who use USD cash. The CZI says government should loosen its grip on the exchange rate.
“The informal sector sells products mainly in the US dollar, and some of the shops are totally rejecting the local currency. They buy commodities from manufacturers at the official rate and sell very cheaply in USD. Shrinking formal consumers are making a run-on stock (priced in Zimbabwe dollars) in formal shops, taking advantage of the exchange rate disparities and formal shops are failing to restock. Manufacturers are demanding cash upfront which also affects restocking.”
The government lifted duty on basic goods saying this was necessary to counter price hikes. But critics say the measure will only hurt local industry. CZI says, instead, government should produce subsidised goods through Silo Foods, the manufacturing arm of the Grain Marketing Board.
“Government should establish processing capacity at GMB Silo to produce basic commodities for the targeted vulnerable households. Government should provide food stamps to vulnerable households,” says CZI.
Government accuses businesses of political sabotage, but a government inquiry into price hikes found otherwise. In their report to government, the Competition and Tariff Commission, the National Competitiveness Commission and the Consumer Protection Commission blamed exchange rate weakness for the crisis, and recommended that the currency be allowed to float freely.
RBZ has rejected this recommendation. Persistence Gwanyanya, a member of the RBZ’s Monetary Policy Committee, told Bloomberg that central bank would stick to the “managed float” system and would not free-float the currency.