Industry and Commerce Minister Sithembiso Nyoni pinpointed Statutory Instrument (SI) 118A of 2022 as a critical factor in the escalating US dollar prices, challenging the legislation’s economic impact during her recent tour of local tuckshops.
Enacted as a temporary measure under the 2022 Presidential Powers, SI 118A permits businesses to implement a 10% markup on official foreign currency exchange rates for their products and services. However, this regulation has unintentionally pressured formal retailers to set prices at significantly higher rates, adversely affecting consumer affordability.
“Retailers are compelled to add an extra charge, leading to an inadvertent spike in product prices in US dollar terms,” Nyoni explained, highlighting the ripple effect of the legislation on market stability.
In contrast, Denford Mutashu, President of the Confederation of Zimbabwe Retailers, called for an outright repeal of SI 118A, Newsday Zimbabwe reported. “The rule has outlived its usefulness, stirring market unrest and confusion in pricing structures,” Mutashu stated. He emphasized that the directive’s revocation is paramount to realigning business operations with natural market dynamics.
Moreover, Mutashu articulated the collective struggle of enterprises grappling with what they perceive as indirect price control, coupled with stringent penalties for exceeding the stipulated markup limit. This environment has precipitated a noticeable decline in US-dollar-generated revenue in formal sectors, overshadowed by more competitive pricing within informal markets.
The United States Agency for International Development (USAID) highlighted a stark rise in basic food commodities’ local currency prices, approximating a 20% surge in contrast to previous months. This uptrend corresponds with substantial hikes in both parallel and official market exchange rates.
Concurrently, informal markets, primarily dealing in US dollars and South African rand, maintain price stability, continuing to serve as the source of prevalent goods for numerous households. This trend underscores the growing hesitance among businesses to engage in transactions utilizing the local currency, which has witnessed a staggering depreciation exceeding 700%.
Recent data from the Zimbabwe National Statistics Agency reveals an overwhelming preference for US dollar transactions, now constituting 80% of the country’s commercial exchanges. The current landscape prompts an urgent reassessment of existing fiscal policies to mitigate the burgeoning economic strain consumers and businesses face.
