Manufacturers favour tuckshops paying forex
GOVERNMENT’S battle to provide lowly priced products to citizens could be futile as long as manufacturers continue to deliver goods to traders in the informal sector, particularly the tuck shops in downtown Harare, which largely operate outside the tax system.
Manufacturers have come under fire in recent months following their alleged “deliberate” move to starve the formal market of basic goods, while supplying the same to the informal market.
Informal traders are preferred because they either pay in US dollars or bond notes, which are immediately converted to foreign currency on the parallel market.
The tuckshops, which are largely owned by foreigners from East, Central and West Africa, sell in bond notes and hard currencies, raising fears that the country is being creamed off of the much need foreign currency.
The Herald Business recently saw a number of haulage trucks moving into the downtown area to deliver basic goods, including cooking oil from local producers, who get foreign currency allocations from the Reserve Bank of Zimbabwe (RBZ) to import raw materials.
Other products such as flour from the country’s top producers including National Foods Limited; beverages from Varun Beverages which makes the Pepsi, Mirinda and 7up brands; sugar from Tongaat Hulett Zimbabwe, and Schweppes products such as Mazoe Orange Crush, are in abundance in the downtown tuck shops.
Streets such as Leopold Takawira and Rezende are difficult to manoeuvre in the evening when delivery trucks go to deliver products.
Even commuter omnibuses have their seats removed to accommodate basic commodities from manufacturers destined for the informal market, which Zimbabwe Revenue Authority (Zimra) Commissioner General Ms Faith Mazani, admitted recently that it was difficult to tax since most of its transactions were cash-based.
On December 23 last year, this reporter was trapped for almost two hours as delivery vehicles continued to pour in for deliveries, and blocked Leopold Takawira Street.
Yesterday, N. Richards Group director Archie Dongo, confirmed the nocturnal transactions by manufacturers as they seek US dollars or bond notes.
“Suppliers are demanding exclusively US dollars or favouring customers (wholesalers) who pay in US dollars, and currently these customers that are willing to pay in US dollars are found in the tax evading informal sector,” said Mr Dongo, while addressing delegates during a breakfast meeting organised by the Confederation of Zimbabwe Retailers (CZR) in Harare.
Mr Dongo said products paid for in US dollars can only be sold in that currency, making it impossible for “law abiding” wholesalers to accept such products considering that the Bank Use Promotion and Suppression of Money Laundering Act Chapter 24:24 demands all traders to accept currencies in the multi-currency basket as adopted in 2009.
Said Mr Dongo: “The whole idea of invoicing in US dollars is so that you get US dollars even though we are in a multi-currency system. So in the absence of convertibility, it follows that if you got stock in US dollars, it has to be sold in US dollars.
“Unfortunately for wholesalers and retailers, there is no legal way of achieving this as the RBZ insists that we follow the Bank Use and Promotion Act, which is against discriminating any legal tender in a multi-currency system.
“Therefore, if a supplier comes to us and says we are now selling in foreign currency, we have no choice except to avoid the product.”
Mr Dongo said he was approached by a “major supplier” last week who “came and demanded foreign currency”.
He explained that given the free reign that informal traders enjoy, tax paying formal wholesalers are staring at the prospect of collapse.
“(The) sustainability of the formal retail industry is threatened by such practices if they continue what they are doing,” said Mr Dongo.
Industry and Commerce Minister Nqobizitha Mangaliso Ndlovu, could not be reached for comment last night as he was not picking his mobile phone.