Businesses quote prices exclusively in US dollars

13 Jul, 2022 - 00:07 0 Views
Businesses quote prices exclusively in US dollars At least the Confederation of Zimbabwe Retailers agrees that this refusal to accept local currency is illegal and says it results from the desire by these manufacturers to charge them only in foreign currency and the complexities of the interbank exchange rate.

The Herald

Nelson Gahadza-Senior Business Reporter

SOME registered retailers and wholesalers are now selling selected popular brands exclusively in US dollars amid revelations that over 90 percent of the key suppliers and manufacturers are demanding payment in hard currency or pegging prohibitive local currency prices.

Popular products such as Mazoe Orange Crush, which is produced by Schweppes Zimbabwe, sterilised milk produced by Dairibord Holdings and brown sugar among others are some of the products that are selling exclusively in US dollars. 

The Confederation of Zimbabwe Retailers (CZR) President Denford Mutashu said that the decision to sell selected goods exclusively in forex was derived from supply chain pressures, as most suppliers and manufacturers are demanding payment in US dollars and rejecting local currency.

“Where one provides an option to pay in local currency, the exchange rate applied is even way above the parallel market, as a result, one is indirectly disincentivised,” he said.

He noted that the quagmire is further exacerbated by the fact that 95 percent of daily sales through formal shops is local currency.

“It’s a dilemma as the law stipulates that goods must be offered for sale in all currencies that are legal tender. 

“It is currently not possible to procure goods in foreign currency and offer them for sale to customers applying the interbank rate,” he said.

Mr Mutashu indicated that the interbank rate must be applied along the whole value chain and not at the store level only.

There are reports that some of the companies accessing their foreign currency working capital from the Reserve Bank of Zimbabwe (RBZ) auction system are abusing the privilege through exclusively selling products in US dollars. 

Mr Mutashu said that pricing should reflect the 20 percent to 40 percent component of the auction market support across sectors.

“It is also high time we look at areas that have fewer players as our economy is too small to sustain monopolies,” he said.

The Government has since moved to revoke duty suspension for Schweppes-owned Beitbridge Juicing Company (BJC) following strict demands for US dollar payments for its products despite enjoying free duty imports on oranges and grapefruit.

The development comes at a time the Government is moving to contain double standards by companies which are in the habit of demanding a cost free operating environment while reaping the most through exorbitant prices.

Confederation of Zimbabwe Industries (CZI) president Mr Kurai Matshezha said the industry lobby body was not aware of its members who are demanding exclusively US dollars for certain products.

“. . . if the retailers are saying here is proof that they are being charged in US dollars exclusively from the manufacturers I would be able to comment on why the manufacturers are doing so,” he said.

CZI recently said that the fact that there continues to be foreign currency auction backlogs despite several promises by the Government remains an issue impacting capacity for manufacturing industries.

Speaking at a retailers conference last month, Mr Achhie Dongo, a director at N Richards Group, said suppliers were now increasingly demanding foreign currency payments for their products with                                               little prospect for settling payments for invoices in Zimbabwe dollars.

He said in some instances, where the Zimbabwe dollar is accepted, retailers and wholesalers are subjected to forward rating and this forward rating on local currency prices then makes the Zimbabwe dollar product expensive.

“As formal sector, our capacity to generate forex from these services is inadequate and this is because customers are not willing to transact through the interbank plus 10 percent rate that is in the market.

“So we are constrained in terms of raising the forex when we face increasing demand for those forex payments,” he said.

Mr Dongo said that while the manufacturing sector has increased their capacity utilisation and some products, with volumes growing, their products will be increasingly missing from the shelf of formal retailers due to the sector’s inability to meet the demand for forex.

“Cooperation of channel members is being disrupted by defensive behaviour in a challenging environment. 

“Everyone is trying to defend their business territory and survive. This situation will result in increasingly informalisation of business instead of the formalisation of new enterprises,” he said.

He noted that the sector has been contributing approximately 20 percent to the country’s gross domestic product for the past three years.

Mr Dongo said the situation could only be addressed through restoration of the Zimbabwe dollar as a currency of store of value, excess unit of account and is accepted as a medium of exchange. 

In addition, he said, “a widely accepted exchange rate is the solution and restriction of liquidity can result in convergence of rate.”

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