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Informal Retail Sector Worst Hit By De-Dollarization Move

Players in the informal retail sector are reeling from the effects of the Statutory Instrument 142 (SI 142 of 2019) which outlawed the multi-currency system alleging that foreign currency scarcity to replenish stocks has worsened since the pronouncement came into effect last week.

The new policy pronouncement has hit hard on most small businesses who relied on pricing in United State dollars to be able to import goods.

“We are now stranded because we no longer get sales in foreign currency and this is affecting our capacity to go and import our wares outside the country,” Oliver Ruzvidzo, a mobile phones accessories trader in Harare, told 263 Chat Business.

This publication understands that most players in the informal retail sector have set prices in the local currency relatively higher so as to cushion their earnings from premiums incurred once they buy foreign currency on the parallel market.

However, the parallel market has also felt the blow from the instrument, with liquidity that was fueling its activities rather subdued.

“I can’t seem to get the Rand that easily anymore on the black market. It is quiet risky to go and source foreign currency on the parallel market, and as you know there has been police operations this past week where many have been raided for trading in foreign currency so it’s really difficult for us to get sufficient foreign currency on the parallel market and it promises to be even worse going forward,’ said one cosmetic products trader who refused to be named.

However the trouble with many small scale entrepreneurs is that they are hardly banked, nor registered as companies hence they cannot access forex through the inter-bank market.

Zimbabwe Association of Retailers president, Denford Mutashu said formal retail players were getting assistance from local banks to make external payments from selected import products, a privilege unbanked informal retail players were starved of.

“What we have is a scenario where those that have been banking, that have relationships with their banks are actually getting the necessary foreign currency for them to be able to replenish,”

“Unfortunately you may have a lot of calls coming from those that were never banking and predominately the noise currently is coming from the informal sector which has become so huge in form and stature so much that it is actually threatening to overtake the formal retail and wholesale sector. So this is the reason why there are so many calls from this sector so we are also saying they also have to comply and have got to begin formalize their businesses by getting registered and also begin to bank their money with local financial systems and also paying taxes,” he added.

Mutashu however said, most formal retail outlets were being sufficiently supplied locally manufactured goods with the exception of selected items not locally produced being imported.

However, the inter-bank inefficiencies continue to hamstring the smooth flow of foreign currency allocation to local producers and importers, experts warn.

“We will certainly require a lot of prudence on the authorities to ensure that the inter-bank should become the sole market that is convenient and sustainable so that business should continue to go there and rely with it and get foreign currency as at when they require it,” Mutashu added.

Government claims to have provided a US$500 million facility to stimulate and stabilize the inter-bank market but reports of the Central Bank manipulating the system continue to diminish confidence in its operations.

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