Zimbabwe’s Retailers Warn of Store Closures Due to Exchange Rate Issues

HARARE (Reuters) – Leading retailers in Zimbabwe are expressing concerns over potential store closures if the government insists on enforcing an official exchange rate that they believe is inflated and detrimental to their competitiveness.

Five months after its introduction, Zimbabwe’s newly launched gold-backed currency, known as ZiG (Zimbabwe Gold), is facing significant pressure. It has depreciated by nearly 80% on the black market, where the currency trades at rates ranging from 20 to 26 ZiG to $1.

Current regulations require formal retailers to set prices according to the official exchange rate of 14.8 ZiG to $1, or risk facing penalties. However, major retailers, including OK Zimbabwe, Spar, and TM Supermarkets (affiliated with South Africa’s Pick N Pay), argue that this overvalued rate is rendering their products more expensive than those sold in informal outlets, consequently driving customers away.

The Retailers Association of Zimbabwe (RAZ) emphasized in a letter to the Ministry of Finance, which was observed by Reuters, that "the situation is clearly untenable and will lead to company closures if authorities do not implement policy measures to protect the formal retail sector."

Retailers claim that, while they are mandated to follow the official exchange rate, their suppliers are charging black market prices, forcing them to increase prices to remain operational. They suggest that adopting a pricing strategy that reflects real-time market exchange rate fluctuations could help maintain competitiveness while managing expenses.

The treasury was not immediately available for comment.

The ZiG represents Zimbabwe’s sixth attempt at establishing a stable currency in the past 15 years, and economists cite its devaluation as an indicator of prevailing public mistrust in the new monetary system.