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OpenCurrency Scarcity Drives Premium Pricing, Says ZNCC CEO Chris Mugaga
Zimbabwe National Chamber of Commerce (ZNCC) chief executive officer, Chris Mugaga, said the reason businesses put a premium on the official exchange rate when setting prices was that there was no foreign currency readily available in the formal market.
In an interview with Business Weekly, Mugaga said businesses are forced to source foreign currency from the black market because it is not available in the banks. He said:
The reason why our constituency put premiums is that they have acknowledged that we cannot get (adequate) forex from the banks. If you go to the bank looking for forex you will not get it.
So, if you cannot get the forex from the banks, where else can you get it other than the black market?
Like it or not, the black market remains a major source of forex for most businesses.
On Wednesday, Finance, Economic Development and Investment Promotion Minister, Mthuli Ncube, warned that businesses caught pricing their products or services using an exchange rate higher than the official rate risk severe penalties.
Responding to questions from legislators during a National Assembly sitting, Ncube said there is no longer any “basis” for shops to use any rate above the official rate after the government recently removed the legal provision allowing traders to put a 10 per cent margin above the ruling interbank exchange rate.
However, Mugaga argued that the stability of the ZiG currency counted for little as long as businesses struggled to secure foreign currency to import raw materials. He said:
What the minister is saying does not define what is happening on the ground. What is happening is that if you go to the banks looking for foreign currency you are not able to get it.
If the minister wants a comprehensive approach, he must look at the whole supply and demand of forex.
If he considers only the stability of ZiG, he will be starting from the front end of the demand and supply chain.
Some business executives say they are now allowed to price products at the exchange rate at which they would have purchased forex from their banks.
When contacted for comment by Business Weekly on the new position, Central Bank Governor John Mushayavanhu could only say “We will issue a statement to clarify.”
Zimbabwe’s economy is nearly 80 per cent dollarised and several businesses have also learnt to survive largely on their domestic foreign currency sales receipts, which they say remain inadequate to cover their needs.
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