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Multi-tier pricing headache

The Reserve Bank of Zimbabwe (RBZ) has threatened to invoke the law to stop multi-tier pricing as foreign currency shortages persist.

BY TARISAI MANDIZHA

RBZ-Building

A three-tier pricing system is prevailing in the market with goods attracting different prices for plastic money, bond notes and the United States dollar. This comes in the form of discounts that can go up to 25% for cash buyers.

RBZ deputy governor Khupukile Mlambo warned last week that the central bank could be forced to invoke the law if the situation persisted.

“There are retailers who are practising the three-tier pricing system for bond notes, swiping and US$. We want to be very clear that this is illegal. We have an Act that we can invoke. I really want to discourage retailers who are doing so,” Mlambo said.

“The last thing you would want is to arrest people. This is a contested environment and if we arrest people, they will say we no longer want to invest in Zimbabwe.

“Yet we can’t watch the public being cheated because it is also counterproductive to the economy. Let us just avoid multiple pricing systems.”

But economist Prosper Chitambara told Standardbusiness that threats would not work under the prevailing environment.

“I don’t think it will work considering the current operating environment,” he said.

“What retailers are doing is trying to make it work considering the difference, the market valuation between the bond notes and the United States dollar. So trying to threaten them will not work.”

Confederation of Zimbabwe Industries deputy president, Sifelani Jabangwe said the solution to the current three-tier pricing regime was to increase exports and create enough foreign currency in the country.

“Once we get enough foreign currency, all this will disappear. What needs to be done is produce locally and increase exports,” he said.

“We need to increase exports so that we reduce our dependency on those two foreign currency earning products, which are tobacco and gold that are seasonal.

“So the remedy for the problem is to supply enough foreign currency and all this will disappear.”

Jabangwe said suppliers had no access to foreign currency and wholesalers were putting a mark-up on their goods.

“In the case where wholesalers have their own foreign currency, banks are saying bring your own currency and we will process your payment immediately,” Jabangwe said.

He said the situation was different when one was transacting through plastic money or bank transfers.

However, Buy Zimbabwe chief economist Kipson Gundani said RBZ was right in warning retailers because the practice of multi-pricing was counterproductive.

“I think the RBZ should be steadfast and try to discourage that malpractice,” he said.

Gundani said what the RBZ was simply doing was interpreting what the law said.

“There is little economic rationale surrounding that,” he said.

“People are living in scepticism and that is where it’s emanating from.

“We now have a substantive amount of bond notes on the market and the dollar is disappearing and this is where there is market distortion.”

The bond note is supposed to be at par with the dollar.

“The challenge is not the foreign currency issue but it’s about priority issues on what we do with the foreign currency,” he said.

“You discover the very people who are externalising foreign currency are the same who perpetuate the black market, so the RBZ is right in issuing a warning against such practices.”

Confederation of Zimbabwe Retailers president Denford Mutashu said his sector would comply with the directive.

Mutashu said the dollar was causing dismay to manufacturers who were “failing to access it to procure raw materials since banks have also been failing to meet external payments obligations for importation of raw materials”.

“It’s a challenge as manufacturers are in turn demanding cash from retailers for certain products,” he said.

Companies have been struggling to access the foreign currency to make foreign payments for raw materials.

A number of them are sourcing the foreign currency on the black market. This has increased pressure on the demand for cash, hence the discounts on cash transactions.

In November, Industry and Commerce deputy minister Chiratidzo Mabuwa told Parliament that it was against government policy for traders to apply a multi-tier pricing system.

She requested “members of the public who may have been subjected to this behaviour to report such cases to the ministry [Industry and Commerce]”.

3 Responses to Multi-tier pricing headache

  1. sindoooraaniket March 26, 2017 at 11:50 am #

    Good insights sir Jambangwe. However, I want to re-emphasise the fact that investor-friendly policies need to be reintroduced so that we benefit from FDI. Furthermore, former commercial farmers were sure that farming was not confined to seasons. Yesteryear, it was a 24/7 process and not an event as is happening today. Flowers, Tea, Coffee, Maize, etc were produced in abundance for domestic and for exportation.

    We now want to see the enactement of non-political inclined business laws that support full production and encourage FDI in the entire economy, thereby reducing dependency on imports, thus creating full employment as well as creating platforms for exportation of finished goods.

    • Guest April 1, 2017 at 4:05 am #

      We ain’t seen nothing yet. The destruction of our productive base has been gradual and widespread at the same time. Every sector of the economy has been decimated, and human capital has been depleted. Land expropriation was the final straw. I have a gut feeling foreigner investors will never have serious interest in our country until farmers who lost their land are compensated. And we keep hoping that someone else will come and bail us out. We can keep dreaming coz that ain’t gonna happen. Even our own African brothers like Dangote saw the rot in our country and decided to stay away. Our only hope is China which is just there to plunder Africa’s resources. FDI my foot!

  2. Sagitarr March 26, 2017 at 12:37 pm #

    The bond notes are worth zero outside our borders, where most retailers buy goods for resale. The crooks are those “ruling” the country with no clues to resolve our economic problems. They are paid handsomely for doing absolutely nothing positive except steal.

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