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Business Reporter
CURRENCY premiums and multi-tier pricing by a minority of retailers are the major factors behind recent sustained gains in inflation, which gained 0,27 percent in April to 0,48 percent, economic analysts say.The level is still very low, and below the 2 percent many economists think is “healthy”. Electronic payments account for 70 percent of transactions and while most retailers follow the law and common sense a minority still offer “cash discounts”.

The electronic system is used at all major retail outlets and fast foods, fuels pump stations, for utility bills, airtime, and beer stores.

Analysts said the few retailers varying prices for payments using different systems such as rapid transfer gross settlement and debit cards, put pressure on consumers to prefer cash to other options when paying.

Coupled with high production costs emanating from currency premiums used to import raw materials, the multi-tier pricing system helped fuel the inflationary environment prevailing at the moment.

Zimbabwe’s annual inflation rate broke onto positive territory for the first time in 29 months after gaining 0,71 percentage points on the January 2017 rate of negative 0,7 percent to 0,6 percent in February.

The country had first entered deflation in February 2014 when the annual rate of inflation shed 0,9 percentage points to minus 0,49 percent, as prices continued to fall in relation to a strong US dollar.

“Despite calls by the RBZ to adopt the use of plastic money, the sustained demand for hard cash is anticipated to be fuelled by the use of multi-tier pricing system by retailers,” said analysts, IH securities.

IH said the central bank’s surrogate currency, bond notes, while it has been wildly accepted, had not tamed the cash shortages.

The central bank says there should be no price differential between paying using cash and other alternatives that include RTGS, POS, internet or mobile money.

The RBZ warned that differentiating prices according to payment system was a criminal offence.

The central bank has encouraged use of plastic money; which saw it revising transactions fees downwards to make the option cheaper.

RTGS fees were set at a maximum of $5, electronic transfers at 33 cents to $2,30, ATM withdrawals at $2,50, point of sale transactions 10c to 45c, POS own bank transactions 20c, removed POS issuer charges, merchant service commission at 1 percent and monthly service fees were capped at $5.

The RBZ said that it had agreed with banks and payment systems providers to reduce transaction charges on electronic transactions in order to promote and encourage the use of electronic banking services.

The fact that Zimbabwe imports most of the raw materials used by industry, in a country facing acute shortage of foreign currency, currency premiums had led to costs that are eventually passed on to consumers.

The Zimbabwe National Statistics Agency is also on record saying the shortage of foreign currency had led to high premiums on money, which was then passed onto consumers, pushing inflation upwards.

According to the central bank, Zimbabwe requires nearly a billion dollars or around 15 percent of current total bank deposits, for the public to transact without encountering the shortage of bank notes.

Liquidity problems besetting Zimbabwe stemmed from the fact that the country switched multicurrency at dollarisation in 2009, but despite legalizing a number of currencies, the elusive and mostly used dollar is the official reporting and transaction currency. However, most of the hard currency is illegally externalised or finds its way out of the country through the country’s huge import bill.