Currency Adjustments Trigger Supply Chain Disruptions in Zimbabwe’s Formal Retail Market

By Makhosethu Ndlovu

A recent survey conducted by the Ministry of Industry and Commerce from the 27th of September to the 4th of October 2024, has revealed significant challenges within Zimbabwe’s formal retail sector, primarily driven by disparities between official and parallel exchange rates.

The survey findings indicate a marked increase in the prices of basic commodities in formal retail outlets, a consequence of recent adjustments to the local currency. In stark contrast, prices for these commodities remain stable in U.S. dollar terms across both formal and informal markets. This divergence raises concerns regarding pricing strategies and consumer purchasing power in the formal sector.

Compounding the issue, formal retailers are grappling with limited stock levels of essential items, including cooking oil, mealie-meal, bread, and sugar. These shortages stand in contrast to the informal sector, where such commodities are more readily available, highlighting inefficiencies in the formal supply chain.

While speaking during the recent cabinet briefing the Minister of Information, Publicity, and Broadcasting Services, Dr Jenfan Muswere, acknowledged the government’s awareness of these challenges and emphasized that measures are being implemented to support the formal sector and improve the accessibility of essential goods.

“Limited stock levels of cooking oil, mealie-meal, bread and sugar were observed in the formal outlets, while the products are readily available in the informal sector. This is attributable to arbitrage, as informal retail economic agents seek to capitalize on exchange rate differentials, given the reported cases of hoarding in the formal sector for re-sale to informal outlets. It is also evident that most suppliers have reduced supplies to the formal sector and are channelling them to the informal market,” said Dr Muswere

“Government of Zimbabwe assures that regular monitoring and stakeholder engagement to ensure market-relevant interventions will continue and that a number of measures have been put in place to support the formal sector,” he added

As the situation unfolds, the sustainability of the formal retail sector remains in question, with market participants urged to adapt to the ongoing economic pressures. Stakeholders are closely monitoring developments, particularly the effectiveness of government interventions in addressing the challenges identified in the survey.