Empty shelves as Zim melt­down bites

Oth­ers shut up shop rather than trade amid wild price in­sta­bil­ity

Sunday Times - - Business Times - By RAY NDLOVU ndlovur@sun­day­times.co.za Pic­ture AFP

● A 330ml can of Coca-Cola costs R8 at Makro in SA. In Zimbabwe, the same prod­uct costs any­thing from $1 (R14) to four times more if one pays for it by card.

And that’s if you can get your hands on a can — as Zimbabwe’s eco­nomic melt­down wors­ens, even Coke is in short sup­ply.

A dis­par­ity in the pric­ing of goods de­pend­ing on the form of pay­ment used — whether it is US dol­lars, bond notes or by card — a run­away black mar­ket, com­pa­nies squeezed by for­eign cur­rency short­ages and re­tail­ers bear­ing the brunt of price in­creases will be a lit­mus test for Pres­i­dent Em­mer­son Mnan­gagwa dur­ing his first 100 days in of­fice. Mnan­gagwa so far has said that some pain will be “nec­es­sary” to lift the coun­try out of its years in the eco­nomic dol­drums.

Com­pound­ing the sit­u­a­tion over the past two weeks has been a short­age of goods such as fuel, cook­ing oil, sugar and medicines. At the heart of the lat­est cri­sis is the short­age of for­eign cur­rency that has wors­ened sharply.

Re­mark­ing on the wave of short­ages, an ex­ec­u­tive in the milling in­dus­try pointed out this week — as the in­dus­try strug­gles to pay for wheat im­ports — that “his­tory has shown that bread short­ages are re­spon­si­ble for bring­ing down gov­ern­ments”.

Com­pa­nies are sand­wiched be­tween be­ing un­able to im­port raw ma­te­ri­als us­ing dol­lars be­cause they are in short sup­ply, and the dif­fi­culty of trad­ing lo­cally in bond notes. The pseudo-cur­rency in­tro­duced three years ago has long since lost its ini­tial 1:1 value to the green­back. For nearly a decade, since Fe­bru­ary 2009, Zimbabwe has not had its

His­tory has shown that bread short­ages are re­spon­si­ble for bring­ing down gov­ern­ments

Milling in­dus­try ex­ec­u­tive

own cur­rency af­ter ditch­ing the Zimbabwe dol­lar in favour of the US dol­lar. How­ever, the govern­ment in­sists the value re­mains at par.

New fi­nance min­is­ter Mthuli Ncube this week said the par­ity of 1:1 would re­main and would be backed by a fa­cil­ity from Afrex­im­bank, head­quar­tered in Cairo, Egypt.

This in­sis­tence, how­ever, is at odds with the rates be­tween the dol­lar and the bond note that pre­vail on the black mar­ket.

On Thurs­day, an un­of­fi­cial par­al­lel mar­ket in­dex called Zim­bol­lar, which tracks the ex­change rate, put the rate as high as $1: $3.85 bond. This means $100 would cost $385 in bond notes. If mak­ing an elec­tronic pay­ment it would be as much $500.

The strain of hav­ing to se­cure for­eign cur­rency on the par­al­lel mar­ket has taken its toll on com­pa­nies, which have hiked prices and passed these on to con­sumers.

Delta Bev­er­ages, a unit of AB InBev, said in a trad­ing state­ment on Wed­nes­day that the im­port com­po­nent of its busi­ness had been “im­pacted” by the hard cur­rency short­age.

“In ad­di­tion, the 2% trans­ac­tion tax took both busi­ness and con­sumers by sur­prise, rais­ing pol­icy risks and un­der­min­ing mar­ket con­fi­dence. Govern­ment and reg­u­la­tors are urged to en­gage stake­hold­ers ahead of ma­jor pol­icy pro­nounce­ments in or­der to main­tain mar­ket con­fi­dence,” it said.

In May, the bev­er­age maker said it had only a week’s sup­ply of raw ma­te­ri­als left for its beer and soft drinks unit.

The Con­fed­er­a­tion of Zimbabwe In­dus­tries, the largest in­dus­try as­so­ci­a­tion in the coun­try, es­ti­mates that there is a back­log of $800m in pay­ments owed to com­pa­nies.

Last month the deputy gov­er­nor of the Re­serve Bank of Zimbabwe, Jes­i­men Chipika, said the coun­try was left with only $200m in re­serves, be­low the three months’ re­serves rec­om­mended by the IMF and World Bank.

Gold min­ing house RioZim said this week it was fac­ing se­vere chal­lenges in ac­cess­ing its for­eign cur­rency earn­ings, and would be tak­ing le­gal ac­tion.

“The sit­u­a­tion is un­sus­tain­able and pro­hibits the com­pany’s abil­ity to op­er­ate vi­ably and main­tain its pro­duc­tion … The com­pany has en­gaged the cen­tral bank on nu­mer­ous oc­ca­sions over the is­sue and min­i­mal progress has been made in im­prov­ing the sit­u­a­tion,” it said.

“There­fore … the com­pany has pro­ceeded to for­mally serve the Re­serve Bank of Zimbabwe with no­tice ad­vis­ing it of its in­ten­tion to file le­gal pro­ceed­ings against [it] for a claim de­mand­ing that the cen­tral bank com­plies with its di­rec­tives and poli­cies, and also for com­pen­sa­tion for any losses that the com­pany has suf­fered as a re­sult of the cen­tral bank’s non­com­pli­ance with its di­rec­tives from 2016 to date.”

Such bare-knuckle con­fronta­tions are rare. Oth­ers have fol­lowed the path of least re­sis­tance.

Sev­eral com­pa­nies, such as KFC, OK Mart and Edgars, closed down some branches in Harare last week. They put up no­tices in­di­cat­ing they were un­der­go­ing stock­tak­ing and ren­o­va­tions, but this was seen by econ­o­mists as a pre­text for their re­luc­tance to con­tinue trad­ing when there is such price in­sta­bil­ity.

John Robert­son, an econ­o­mist in Harare, said that without any pro­duc­tiv­ity tak­ing place it would be al­most im­pos­si­ble to re­deem the econ­omy, which has been un­able to at­tract credit lines.

Af­ter meet­ings this week with the IMF and World Bank in Bali, In­done­sia, Ncube said the two in­ter­na­tional fi­nan­cial in­sti­tu­tions had en­dorsed his two-year eco­nomic plan, which in­cludes a raft of aus­ter­ity mea­sures.

“The meet­ings have been the best so far on Zimbabwe’s ar­rears-clear­ance process,” Ncube said.

A Harare food re­tailer’s shelves re­veal the scarcity of prod­ucts for sale, in­clud­ing bread and meat, as Zimbabwe ex­pe­ri­ences re­newed short­ages.

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