Empty shelves as Zim meltdown bites
Others shut up shop rather than trade amid wild price instability
● 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.