The weakening of the South African rand against the dollar has triggered a wave of commodity and service cost adjustments in Zimbabwe as businesses seek to avert losses from exchange rate disparities. Analysts fear the trend would cripple domestic industry competitiveness as it makes it easier to import from the neighbouring country while increasing export costs.
South Africa is a major importer of Zimbabwe’s raw materials and supplier of most finished products. The currency recently clocked historic lows of R14 to the green back in the wake of falling commodity prices and a recent economic slowdown in China. It marginally clawed back on Wednesday at $1:R13,6 as the fading likelihood of a United States rate increase next week boosted emerging markets.
Yesterday commuter omnibuses and several businesses in Bulawayo had adjusted their prices to reflect the changes in the exchange rate. Kombi crews were charging R7 for a trip from between R5 and R6. “With effect from Thursday (10/09/2015) Kombi fare remains $0, 50c or R7 or $1 for 2, Rates $1 = R14,” read a notice from one commuter omnibus.
Ratepayers to the Bulawayo City Council are greeted by notices of a $1:R15,50 exchange rate pasted at the Revenue Hall. “Exchange rate with effect from September 8, $1 as to R15,50, $1 as to P11.50, $1,4 as to 1 Pound (British), $1,4 as to 1 Euro,” read the council notice.
Choppies supermarket had also placed its exchange rate at $1:R14 while OK Zimbabwe’s was $1:R14,07. Forex dealers were trading R100 for $6.10 with $10 going for R13.90. “We used to get a mark-up of around R5 to R8 for every exchange of a hundred rand to dollars but now the continuous fall of the makes us get R0.50,” said a city forex dealer who preferred anonymity.
Another dealer, Tawanda Muchineripi, said the foreign exchange business was not performing well due to the fall of the rand. “We’re no longer gaining anything. The fall of the rand is impacting negatively on our business. I pity those with relatives in South Africa because with the money they receive from that side is no longer valuable,” he said.
Vendors are also crying foul.
“Right now we don’t even know the current exchange rate. We can peg our rates at $1 as to R14 but when we go to purchase our stock we get shocked to learn that their rates are a way beyond R14 and we will be forced to fork out from our profits hence left with nothing at the end of the day,” said Melward Marufu, a vendor.
Another vendor, Susan Sibanda, said they were now demanding transactions in bond coins to avert losses. Economic commentator Trust Chikohora said the devaluation of the rand against the US dollar spells doom for local industries. “Since our economy is predominantly US$, prices of local commodities will remain the same and it will become cheaper to import from other countries hence competitiveness in our local industry will be lost,” said Chikohora.