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New US$ pricing sparks confusion

by Staff reporter
24 Jun 2020 at 17:22hrs | Views
THERE was massive confusion yesterday as retail shops were meant to start charging their goods in both American dollars and the local currency, the Daily News reports.

Instead of making life easier for long-suffering consumers, the new system created its own new set of challenges - with many retailers completely removing prices from their shelves, while some small shops were rejecting the Zim dollar altogether, in anticipation of the new foreign exchange rates that kicked in yesterday.

This comes as the government yesterday launched its new foreign exchange auction system, which ended the day with the Zim dollar trading at nearly 58 against the greenback.

It also comes after under-fire Finance minister Mthuli Ncube signalled Zimbabwe's imminent return to dollarisation last week - after he awarded civil servants and State pensioners allowances in US dollars - despite him having reintroduced the Zim dollar only last year.

Daily News crews which went around Harare, Bulawayo and other urban areas yesterday found that many shops only had their prices in US dollars - which were at high levels - and which were decided ahead of the introduction of the two-tier pricing system which now prevails.

This prompted consumers who spoke to the newspaper to implore authorities to rather embrace full dollarisation instead of tinkering with measures that did not help to mitigate their plight.

"I believe that things will work better if shops just price their products in US dollars and we fully dollarise the economy.

"This will bring about some stability in pricing because currently you find an item costing $50 today and tomorrow it will be $100 or $200.

"However, with the US dollar prices do not change constantly. If an item is US$1 today you are most certainly guaranteed that it will be the same price tomorrow and a week later," one shopper, Innocent Mukamba, said.

"I don't earn US dollars, but it has become part of my planning that when I receive my salary in RTGs I immediately buy US dollars to store value.

"I then plan what my family needs for the month and what I can save using the US dollar because I can't plan or save with the Zimbabwe dollar, which loses value on a daily basis.

"The government should just completely do away with the Zimbabwe dollar because it is not adding any value. In fact, it is creating confusion and suffering in this country," Mukamba added.

Another consumer, Memory Frank, said the government and retailers needed to work in harmony to avoid the high and confusing pricing that was being witnessed.

"If the government can manage to control the exchange rate and ensure that prices in supermarkets are pegged equivalent to the new exchange rate, then a dual pricing system might work.

"However, what we have seen in the past is that the government has failed to control the exchange rate and currently supermarkets are charging their prices using the black market rate.

"This disadvantages shoppers who want to buy using the local currency because the prices keep changing on a daily basis.

"What we need in order to move forward as a nation is to adopt a stable currency and that is the US dollar," Frank said.

Meanwhile, top economist Tony Hawkins said yesterday that the retail confusion had been brought about by uncertainty regarding where the exchange rate would be pegged in the next few days.

"Retailers are anxious as they are not sure what is going to happen after the launch of the new exchange system.

That is the reason why they are removing price tags and withholding their products.

"The government has said that the introduction of the new exchange rate system will stabilise the exchange rate and also put to an end speculative tendencies.

"However, this has not inspired confidence in the economy and it is going to be difficult to achieve these goals," Hawkins told the Daily News.

"This is because the new exchange system will be changing the rate on a weekly basis and retailers will still be left anticipating how the rate will perform in the coming week.

"This leaves them in a conundrum of whether to charge their goods using last week's rate or to speculate on what next week holds," Hawkins further told the Daily News.

"Ultimately, what is happening here is the road to full dollarisation, and unfortunately our government is too embarrassed to admit that we are dollarising.

"Having a dual pricing system is just a way of slowing down what is inevitable. But as we have seen, the market is already rejecting the local currency in favour of the US dollar," Hawkins added.

On its part, the National Consumer Rights Association (Nacora) said the government needed to fully dollarise the economy, instead of maintaining the Zim dollar which was creating distortions in shops.

"The dual pricing system creates a dual economy where those who have the US dollar will access cheaper goods, while those who have no access will be subjected to continuous price hikes.

"A dual system cannot work when there is a very weak and strong currency at the same time.

"What will happen is that we will see businesses charging exorbitant prices in the local currency just to discourage consumers from using it, and driving them to use the US dollar," Nacora advocacy and campaigns adviser, Effiel Ncube. said.

"We will also see businesses in different parts of the country beginning to determine what prices they want.
"The market has already decided that the Zimbabwe dollar is an unstable currency and cannot be used if one wants to sustain his or her business.

"It will be prudent for the government to admit failure and return to the multi-currency regime or the use of US dollars exclusively," Ncube added.

Last week, the government all but signalled a return to dollarisation after Ncube awarded civil servants and pensioners allowances in US dollars.

The decision came as the country's economy is rapidly approaching the horrors of a decade ago when the Zimbabwe dollar was decimated by hyper-inflation - with the prices of most basic consumer goods now out of the reach of ordinary citizens.

It also had similarities with how the then administration of the late former president Robert Mugabe introduced the stability-inducing multi-currency system in 2009.

Then, Zimbabwe binned its worthless currency and introduced the multi-currency system which was anchored by the US dollar.

Despite this system having served the country well for more than a decade, Ncube rattled the markets in June last year when he prematurely and ill-advisedly ended the local use of the US dollar and other foreign currencies.

He directed at the time that the Zim dollar be the sole legal tender in the country, without addressing the root causes of its crash and subsequent decimation by hyper-inflation in the run-up to the consummation of the 2009 short-lived but stability-inducing government of national unity (GNU).

Source - dailynews