Retail Giants In Zimbabwe Face Collapse Without Exchange Rate Reforms
Zimbabwe’s largest retailers have warned the government that their businesses may face closure unless it addresses an exchange rate policy that is driving customers away from their stores.
Formal retailers are compelled to use an overvalued official exchange rate, making their products more expensive than those sold in unregulated tuckshops.
The Retailers Association of Zimbabwe (RAZ), which includes companies such as OK Zimbabwe, Pick n Pay, SPAR, and Edgars, said that the formal retail sector could collapse without government intervention and policy measures to protect it. They wrote:
The situation is clearly untenable and will lead to company closures if authorities do not intervene with policy measures to protect the formal retail sector.
The industry employs nearly 20,000 people and serves as a major revenue collection agent for the Zimbabwe Revenue Authority (ZIMRA), contributing significantly through key taxes such as Pay As You Earn (PAYE), Value Added Tax (VAT), Intermediated Money Transfer Tax (IMTT), various withholding taxes and corporate tax.
Retailers are obligated to use the official exchange rate, while suppliers operate with street rates. To mitigate their losses, supermarkets have been forced to raise prices to restock their inventory. RAZ said:
In order to avert massive financial losses, formal retailers have had to take steep USD price increases to generate revenues at the WBWS Exchange Rate that would be commensurate with suppliers’ unit selling price into retail.
This inevitably leads to real USD inflation creep along with many other economic and social ills as consumers shun formal retailers in favour of informal channels.
RAZ proposes two alternatives to bring back the stability of prices and trade in the formal sector.
The first proposal is a market-determined exchange rate, that is, the implementation of a pricing model that reflects real-time market exchange rate fluctuations which will help them remain competitive while managing costs.
The other proposal is discounted pricing. RAZ said this keeps the official exchange rate constant while formal retailers offer differentiated discounted pricing by product to reduce inflationary impacts in USD terms, incentivize purchases and stimulate demand. They said:
RAZ can periodically compile market statistics to help Fiscal Authorities shape policy, as well as self-regulation on market wide acceptable exchange rates.
RAZ further proposes a review of the role of the Financial Intelligence Unit (FIU) to now evolve from monitoring and punishment to purely monitoring and advisory.
RAZ is available to share with the FIU, on either a monthly or quarterly basis, the exchange rate and inflation dynamics in the market for further policy refinement.
We need to establish a more cordial and productive relationship between FIU and formal retailers which has now deteriorated into policing and punishment status.
More: Pindula News
