Downtown pricing headache
THERE has been a steady increase in the prices of some commodities over the last few weeks in the country’s leading retail outlets with players in the sector attributing the surge to foreign currency shortages.
A snap survey by The Herald Business in some of the leading retailers, Pick n Pay, Food World and OK Zimbabwe, show a uniform general hike in prices of imported goods that started in September with demand increasing as schools opened.
The price increases range from basic commodities such as mealie-meal, rice, flour, bath soaps and laundry soap, the mini survey revealed. The cost of standard 2kg rice, which was $1,80 in July has increased to between $2,29 and $2,63. A packet of 2kg self-raising flour has in the past few weeks jumped 22 percent from $1,71 to $2,10. The cost of 2kg brown sugar has increased from $1,85 to $1,95 while laundry soap bar now ranges between $1,29 and $2,45 from $1,21.
One needs at least $135 to buy US$100 through banks transfers. The trend is also similar with other basic food items and goodies. However, the rate in price hikes range from one retailer to the other. Indications are that the cost of importing some goods or basic raw materials for manufacturing has increased due to foreign currency shortages, subsequently pushing total cost of production and prices up.
Commenting on the developments yesterday, Confederation of Zimbabwe Retailers marketing and stakeholder relations director Alois Burutsa, said the organisation had also seen the price increases.
“We have definitely seen prices going up and we believe this is a result of retailers resorting to the illegal market to source foreign currency, which has not been forth coming from formal channels.
“The cost of money from the illegal market is very high and retailers have no choice but to pass some of that cost to consumers. Mr Burutsa said retailers had since approached the Reserve Bank of Zimbabwe (RBZ) to get foreign currency.
“The RBZ has asked us to compile our forex requirements and we are still in that process although we have submitted some requests for forex,” said Mr Burutsa. On the issue of vending, Mr Burutsa said the CZR is working on hosting an all stakeholders meeting with the RBZ, Zimbabwe Republic Police, Zimbabwe Revenue Authority and Local Authorities to try and stop the rot.
Cash shortages bolstering parallel markets
One cannot say “official parallel rate”. After all, parallel markets are classified as such because of their lack of regulatory acknowledgement. Since the inception of bond notes, through voice and literature the Reserve Bank of Zimbabwe had never affirmed parallel rates to the US dollar. To the central bank’s assuagement, the parallel exchange rate had been formally negligible for some time.
Recently, however, pressure has intensified and the central bank itself has begun to allude to a more prominent parallel market, one, which threatens the 1:1 parity between the greenback and the nation’s surrogate denomination.
RBZ governor Dr John Mangudya recently acknowledged the premium charged on hard cash, noting that the difference between bank balances and hard cash will only push up these premiums. A snap survey by The Herald Business around the Harare central business district show dealers are charging premiums of 8 percent bond to US dollar, 30 percent bank transfer to cash (bond notes), 35 percent bank transfer for cash (USD). Hard cash exchange rates are 11 percent bond note to South African rand, and 12 percent USD to SA rand.
The premiums were once deterred by sufficient foreign currency reserves, albeit it in a priority list form. More recently, another nostro facility arranged by the RBZ is expected to ease premiums for hard cash. But perhaps more effecting had been the commendable market empathy for the central bank. Market agents volunteered a social contract with the RBZ to conduct business on the understanding that bond notes were at parity with the USD. Hence, many formal retailers did not have multiple pricing structures.
This empathy has in recent weeks been increasingly tested as market agents are being forced to source hard cash on parallel market where there are premiums. The question now is, how long can the central bank continue to signal the enforcement of the formal 1:1 parity rate? For the formal market agents still abiding to the social contract with the central bank, official banking platforms have become frustrating by continually disappointing in their availability and transactionary efficiency.
The two sides of Julius Nyerere Way
Historically, Harare is known as the sunshine city, with attention focused on its high rise buildings on the eastern side of Julius Nyerere. Most formal businesses, those that pay taxes and give proper contracts to employees also operate from the eastern side. But this sort of glitz, at least by Zimbabwean standards, obscures another reality, one of lawlessness and non-conformity with expected norms of formal businesses that is seen on the western side of Julius Nyerere.
While at any given time the eastern side has some semblance of order even from the vendors that operate in the streets, the western side is characterised by chaos, with pedestrians struggling to find pathways, as pavements are taken over by vendors. Noise pollution is the order of the day, as the notorious kombi drivers try to outdo each other in the battle of who plays the loudest music. Not to forget the touts shouting at the top of their voices in calling out destinations, as if commuters do not know where they are supposed to go.
Business wise, the chaos and lawlessness that characterise the environment is also a reflection of how business is conducted. In the western side, they sell goods that were smuggled into the country or did not pay duties as required.
There, the health inspectors are often bribed, you can just see by the lack of ambiance, which even student health inspectors would not pass. During the night, roads are blocked, as pushcarts take over, providing all manner of basic products, at prices probably half of the retailing prices during the day. On the flip side, property landlords are making a killing. Unlike the eastern side, where voids are upwards of 50 percent, on the western side tenants are scrambling for retail space and those that can’t find formal space, are bringing the famous mupedzanhamo, right into the CBD.
Tuckshop economy thrives on cash
THE three tier pricing system continues to thrive in downtown Harare with prices of basic commodities pegged in United States Dollars remaining stable — if not coming down compared to other major retailers — while marginal increases are being recorded for bond notes purchases.
Worryingly, the usage plastic money which the Reserve Bank of Zimbabwe (RBZ) is pushing for in the midst of crippling paper money shortages, is gradually being phased out with the few retailers and wholesalers that are still accepting the mode of payment charging up to 20 percent more. Since many groceries are largely imported from neighbouring countries, traders are increasingly shunning plastic money as they encounter problems when attempting to cash it out for purposes of restocking across the Limpopo; hence the switch to mainly United States dollar transactions.
A snap survey conducted by The Herald Business yesterday revealed that most of the small-scale traders who conduct their business south-west of Julius Nyerere Way, are no longer accepting plastic money regardless of the rate offered. Most common in the downtown area are grocery tuckshops, women’s cosmetics and car parts. The shops are mostly being run by Rwandese, Indians, Nigerians, Congolese and Tanzanians who established their presence soon after dollarisation.
For bond notes payments, consumers are paying an extra 10 percent compared to what obtains for those paying in US dollars. A two litre bottle of cooking oil, for example, is going for an average US$3 or $3,30 in bond notes. Boom washing powder (2kg packet) is selling at US$3,50 or $3,90 in bond notes. Even eggs that are in short supply in mainstream shops mainly due to the effects of the deadly Avian Flu that has depleted Southern Africa’s poultry industry, are available in downtown Harare only on cash purchases at $4,70 per crate against $7,50.
A trader who accepts the three-tier pricing system said he was charging more for plastic money with a 20kg carton of brown sugar going for US$13; $14,50 bond notes and $18 (swipe). Given the low confidence that citizens have with the banking sector, many people — including the elderly — could be seen making cash purchases in these small-scale shops, indicating that money is now widely circulating in the informal market. Some of the retailers who spoke to this publication said they make an average $1 500 a day.
Pushcarts bring in the cash
Cash is increasingly becoming concentrated in the informal sector and particularly on smaller products. A quick walkabout by The Herald Business yesterday revealed that hard cash is still circulating in the country but it has become more concentrated on smaller products and commodities.
Fruits such as bananas and apples have become the biggest cash mobilisers in town and this is being done through pushcarts (zvingoro). The rise in the number of push carts carrying fruits for resale is testament that there is a new economy which observes argue is being driven by some of the well-heeled people in society.
Walking or driving along Robert Mugabe Way during knock-off hours has become a nightmare as the road is invaded by pushcart vendors, who sell their products strictly on a cash basis.
Interestingly, the pushcarts are also hired for $2 per day or can be purchased for $50. It is understood that a cartel of deep-pocketed citizens mainly of Indian origin manufacture the pushcarts, which are well designed and numbered and bear the owner’s mobile phone number. The pushcart owners also reportedly sell the fruits – mainly bananas and apples – in bulk, an indication that the business has become organised.
“We get both the pushcarts from a shop that also supplies us with the fruits. The choice is yours to buy the fruits in bulk from the supplier, and then hire the pushcart for $2 per day or buy it for $50,” said one of the traders. Others said they are in the employment of the owners who pay them a salary of $8 per day. The owners can cash up to $60 – $80 and for those who own up to 50 carts; cash earned can amount to around $3 000 – $4 000 per day.
