US dollar black market rate soars

HARARE - A crazed pre-election demand for the United States dollar has pushed the black market premium to an all-time high as shortages of foreign exchange fuels a roaring currency black market now driving up food prices.

Prices of basic commodities over the past few weeks have risen as businesses seek to insulate themselves from an inclement financial environment which could erode their earnings if they do not put mark-ups.

As a result, consumers are suffering the consequences of this economic malady, underlined by a soaring cost of living and worsening suffering of the populace.

Government is being urged to prioritise food in terms of access to foreign exchange amid reports the incremental increases of goods on grocery shelves had occurred because suppliers were not getting enough currency.

The parallel market cost of the US dollar to bond notes has risen to 142 percent from about 130 percent in just under a month while the electronic transfer rate on platforms such as Zipit, RTGS and mobile money transfers has soared to 170 percent (US$100 fetches $142 bond notes or $170 in electronic transfers) — over the same period.

From importers to manufacturers and retailers, those in the formal sector are mourning and economists have warned of a continued economic distress as elections draw closer.

They are not even sure if the situation will ease in the aftermath of the elections.

Confederation of Zimbabwe Industries president Sifelani Jabangwe said the local manufacturing industry was reeling from the foreign currency shortage.

Zimbabwe is still smarting from a sustained period of price increases stretching for nearly two years since the introduction of bond notes as a surrogate currency to the dwindling US dollar in November 2016.

“Businesses are having great difficulties accessing foreign currency. This has been mainly due to the fact that our requirements have grown in addition to the backlog which we still had.

“Supply has not matched this demand and in order to restock or buy raw materials, we have had to turn to the parallel market where the premium is ridiculously high now,” said Jabangwe.

“Our economy is not generating enough foreign currency and this is why we are encouraging our companies to export more and not just consume the foreign currency they generated the last time,” he added.

Zimbabwe National Chamber of Commerce (ZNCC) president Divine Ndlhukula said there has not been any breather from the first quarter to the second and current quarter of the year in terms of accessing foreign currency.

“Most of our members can’t access foreign currency in the formal sector anymore. We don’t know what is happening. Businesses are being forced to look for the money on the parallel market,” said Ndlhukula.

President of the Confederation of Zimbabwe Retailers Denford Mutashu said from the reports that are coming from industry, business and other sectors, it’s getting worse and it’s worrisome.

“The lack of a response strategy to the foreign currency shortages is damning.

“It looks like there are some people in authority who are living in denial, hoping the foreign currency situation will sort itself out and it’s very sad,” he said.

University of Zimbabwe economics professor Tony Hawkins said: “First of all there is a shortage in the market, the supply of chain. Most of the goods manufactured in Zimbabwe have an imported content.

“And you look at the availability of money. If you look at the money supply on the parallel market it gives you a better picture of what we are going through.

“The IMF forecasted inflation to be around 30 percent this year and all I can say is that it may be the highest we have seen since 2008,” he said.

Economist Elliot Lumbe argued that for prices to go down, the parallel market cash traders must be eliminated. Finance minister Patrick Chinamasa has blamed the police for failing to arrest unlicensed foreign currency traders saying there was a legal framework in place to curb the vice.

“Let’s get rid of money traders which involves big guys from the government because they are the ones that access large sums of cash in both the United States dollar and bond notes,” he said.

Lumbe said for goods that are produced locally, there is lack of discipline along the entire chain, from manufacturers down to retailers.

“Prices are pegged differently basing on the mode of payment, for example bond notes have their own commodity value, the US dollar has its own commodity value,” he added.

Reserve Bank of Zimbabwe (RBZ) governor John Mangudya could not be reached for comment yesterday.

But President EMmerson Mnangagwa told a Zanu PF rally in Bulawayo last weekend that eventually ended tragically after a bomb exploded, that the grinding cash crisis could only be bringing back the Zimdollar.

“Our Zimbabwe dollar collapsed in 2008 and 2009.

“We then adopted a basket of currencies — the South African rand, the United States dollar, the British pound, the Euro and so on,” Mnangagwa said.

“Initially, the US dollar and the rand accounted for 40 percent each and the other 20 percent was the balance of other currencies. As time went on, the US dollar became dominant.

“The US dollar today takes about 90 percent of our transactional activity in the economy.

“We have no control over the US dollar, it is time that we must adopt our way of restoring the dignity of our country by creating our own currency.”

Economic analysts have predicted doom and gloom for the near future, unless stern measures were taken.

Comments (15)

I submit that it is critical that the government deals with the cash shortages and forex shortages in a robust manner after getting a deep understanding of the underlying causes. Chasing away the traders, as the learned economist suggests, will only aggravate the situation. The market will become more opaque and prices will actually surge higher. Economists are entitled to their opinions but if they give us Chinotimba like arguments we become extremely worried.

Diaspora Proxy Vote Strategy - 28 June 2018

By using the dollar as our own currency,we fell into a pit of the un known.Its also frustrating to think why we never fully accepted/apriciate the Euro/pound.Syria rejected the dollar and they are being made to pay for such obidience.Saddam declared that oil prices be quoted in Euro and they hunt him for non-existent weapons of mass dwestruction.Gaddafi also rejected the dollar only to be punished.Why/how /who came to the decision of using the dollar was thinking from an air-conditioned office on the 13th floor of the horror that is imminent.

farai - 28 June 2018

Time to bite the bullet (pun intended) and get back to basics. All those destroyed commercial farms have to be rebuilt. Same goes for all the destroyed industrial infrastructure. And for mining. 40 years of determined self-destruction won't be reversed in 2. Or even 10. But - time to make a start.

spiralx - 28 June 2018

Zanu PF hid $15 billion in China now they are using it for campaign. We knew they wanted to wipe out the US dollars in the formal market that is why they introduced the Bond Notes. Now Zanu PF is fuelling the parralel market for US dollar to finance their campaign. We are not fools.

mufaro - 29 June 2018

LETS ALLOW MARKET FORCES TO RULE OUR ECONOMY .LETS DO AWAY WITH THE SO CALLED BOND NOTES AND RETURN TO USING THE US DOLLAR BECAUSE OUR ECONOMY IS TOO WEAK TO SUSTAIN OUR OWN CURRERNCY AT THE MOMENT.YOU MAY AGREE OR DISAGREE BUT THIS A PANACEA TO OUR UNIQUE CRISS .LETS ENGAGE THE IMF AND THE UNITED STATES DEPARTMENT OF INTERNATIONAL RELATIONS ,THE BRITISH GVT AND THE SOUTH AFRICAN RESERVE BANK BECAUSE THE CASH CRISS HAVE BECAME BIGGER THAN US WHILE WE TRY TO PUT OUR HOUSE IN ORDER.

EDD - 29 June 2018

One USD equals two mabondi notes comrades. Never bank a USD as if you do you will get back mabondi notes & coins. Greshams law where bad money drives out good is proving true once again in ZW - 400 year old law

ace mukadota - 29 June 2018

FASTJET - the UK airline is near to bankrupt due to its monies blocked in ZW

ace mukadota - 29 June 2018

its just a political move by the MDC alliance to frustrate zimbabweans so that they do not for Zanu PF. Its their trick every time to make the majority suffer so that they blame the government for the hardships they deliberately create. zimbabweans can not be fooled by such a silly and childish political gimmick. Dziva Guru Idiva kamwe takambozviona panguva ya Tsvangison vachikumbira masanctions. ED muoffice come 30 July.

kid marongorongo - 30 June 2018

how does the MDC do that @kid marongorongo , i think you are out of touch with reality

matebele warrior - 30 June 2018

and you hear another fool saying ed has my vote

josphat mugadzaweta - 30 June 2018

If there is anyone with brains at Zanu-PF surely they knew this would happen

Bam Bam - 30 June 2018

With comments like I am seeing here i believe that Zimbabweans are possibly the dimmest people in Africa. ZANUPF have ruled for 40 years and yet there are people who still want to vote for them ?

ace mukadota - 2 July 2018

We have economic strategists who represent us worldwide, they are not glued to any [political party. We opt to here from the discuss about their views on subject matters, may your team please reach for them otherwise the blame might end up being given to mere politicians

Uncle Sam - 2 July 2018

We have always been squeezed economically as we approach elections in a bid to influence the vote. Of course we took our land and got squeezed, they said they will make the economy scream but we still have our land and ZANU PF is ruling. The forex shortange not withstanding, ZANU PF will win elections come July 30. Those talking about boycotting elections have done it before and ZANU PF continues to rule. Indeed anomakwa ndiye ane bhora tese tiri kuona zviri kuitika kuworld cup. So, yes ED has my vote.

willie - 5 July 2018

interesting comments! Does anyone know why some foreign companies are investing in Zimbabwe?

Godfrey - 24 July 2018

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