Yesterday the government announced SI 127 of 2021 which put new rules and penalties of forex use. The Statutory Instrument looks like it was designed to stop businesses from pricing goods and services above the auction-rate more than anything else… The response by businesses as we saw in a tweet by journalist Hopewell Chin’ono is to increase local currency prices so that they don’t lose out to the prevailing 1:85 official rate as mandated by SI 127 of 2021.
My plumber went into a hardware shop to buy this stuff.
— Hopewell Chin’ono Today (@daddyhope) May 28, 2021
It was Z$1600.
The shopkeeper said they are now forced by Mnangagwa’s Statutory Instrument to use the exchange rate of 82.
So in USD it was US$19.
Yesterday it would have been US$12.
He then paid US$7 for it in Mbare. pic.twitter.com/gVt8qstA2U
In light of this, we decided to go over some of the other potential consequences that may come up because of SI 127 of 2021 for consumers and businesses.
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14 comments
I don’t understand why the ZWL price would increase. What would increase is the USD price. The ZWL prices were already pegged at black market rates, so the USD price is increased, so that the official rate conversion gives the same ZWL yield.
Pretty much spot on.
If I sell a good value at $10 usd .
At bank rate that’s $850 zwl .
But if I need usd to replace that good i will have buy it at black market for around 125 zwl:1 usd .
Meaning I need to sell my $10 good at a rate of 125 I.e zwl $1250
Now if a customer wants to pay in usd , then I will divide $1250 by bank rate =$14.7 usd
Thus i have increased usd prices by 40%
The statutory instrument is actually a devaluation instrument, it devalues the USD in the eyes of USD holders, as an example, in other words iam being told my 10 USD in my pocket is not worth what I know it to be I.e a 1000 rtgs but is instead worth 850 rtgs. This is how people are seeing this thing🤷. If I have to go to the shop to buy something that was worth 1000rtgs which was 10 USD, now I have to folk out much more than 10 USD because the instrument says the rate is 84, and additionally shop owners are forbidden to give discounts to forex holders, clearly shops are not going to decrease rtgs prices, undersatably so because the black market rate will not decrease it will remain where it’s at.
We have a problem of thinking everything should be in USD terms. You find someone always pricing their products in forex whilst they incur costs in ZWL. I hope we embrace our local currency more and more.
You have to think in USD terms because there are components for business and personal use that are either charged in USD, or pegged against USD.
The first component, that everyone uses, is fuel. If you are living your life strictly using ZWL, then you are either spending a lot of productive time queueing for fuel or you don’t have a car. Your mentality would have those queued folks believe they are buying “cheaper” local currency fuel. Meanwhile, they could be doing other productive work or even resting (something few have a chance to do). Coupled with limits per car, you will be a slave to ZWL fuel queues.
The next one component is electricity. Charged in ZWL but seems to go up every now and then, despite the local currency being “stable”. Power went up, so get ready for price increases.
If you’ve ever run any sort of business in Zim (even a tuckshop), you’ll realise that if you do your budget in ZWL, your projections projections will constantly need adjustment and revision. This will become half your work, otherwise, you’ll be celebrating a profit meanwhile you have made great losses. A USD budget requires way less maintenance, allowing you to do actual work. Unless, you like being a “busy” business person, working hard into the night. I’d rather work smart, watch some Netflix and sleep early.
Even the government pegs fines and fees in USD, though payable in ZWL, so they automatically adjust according to Mthuli. Many duties/permits are collected/paid for strictly in USD, how then do you cope as a ZWL earner? No passport for you. No car for you.
Anyway, feel free to do you, embrace ZWL… Uzofunga kuti wakaroiwa.
Akaroiwa is zimbabweans who think keep failing to embrace zwl. What gives value to a currency is the confidence that we as zimbabweans put in it. The love we have for usd in this country comes down to greed. We love usd because we say it holds its value which is true, but we go on to overcharge for everything using the same usd. The desire to get rich quick is what drives our love for usd and makes us neglect our own currency. People forget that bond notes were originally introduced to counter shortages with the usd back in 2016. We cant sustain a foreign currency when we do not have meaningful production and when we rely heavily on imports.
But that’s just me. Panyaya ye usd muzimbabwean haumugoni.
So, you think the solution to cases of overcharging is in changing the currency. Do you honestly think people who are greedy when using USD, stop being greedy when using ZWL? Zimbabwe could even adopt the Bolivar and the greed would still persist.
At least you admit USD preserves value. Is that not what you want for yourself and your savings/investments? Are you saving in ZWL?
The irony is that you are blaming citizens (who had little input in the re-introduction the currency) for poor confidence in ZWL, yet making no mention of the government that introduced it and doesn’t fully embrace the currency itself. Even top officials receive allowances and pensions in USD. Why is that?
The greater irony is that you probably have USD in your pocket, despite your resentment for it. Walk the talk and lead from the front with your embracement.
Who is blaming citizens. Isn’t zimbabwe comprised of citizens, government etc. No irony there just you not realising that the government are also zimbabweans.
Typical of zimbabweans to try and find blame elsewhere when we are actually to blame also. The curreny in my pocket is not an issue here. The issue is how to build our economy using a viable currency that can be sustained. No amount of usd can change our situation unless we change how we think as a country.
My friend, nothing is going to help except government stops doing just enough. People will always resort to means of survival even iif itt means using parallel market. Since independence we have had enough minerals to turn around our economy, build infrastructure to the most remote areas. But lack of vision in our government hass put everything in jeopardy. Soon minerals will be depleted yet we have nothing to show for it. Corruption, yes we are are, but it’s born trying to make a living, yes, the government is too. How can USD15Billion worth of diamonds disappear with no trace, we need 3Billion per year as a budget? Businesses, farms and buildings possessed by top govt officials and senior army officials, then you tell us to embrace the Zim dollars? Right now corona hit the world, we don’t have enough infrastructure but not because we can’t but coz of misplaced priorities. Who in this day and age kneels in front of a statue to fix the economy?
This is the best response.
The challenge is people genuinely fear their zwl being devalued and losing everything as they did in 2008 . 2016/17 , 2018 .
Why would anyone embrace a currency that is not even recognized on world markets?
So, you think the solution to cases of overcharging is in changing the currency. Do you honestly think people who are greedy when using USD, stop being greedy when using ZWL? Zimbabwe could even adopt the Bolivar and the greed would still persist.
At least you admit USD preserves value. Is that not what you want for yourself and your savings/investments? Are you saving in ZWL?
The irony is that you are blaming citizens (who had little input in the re-introduction the currency) for poor confidence in ZWL, yet making no mention of the government that introduced it and doesn’t fully embrace the currency itself. Even top officials receive allowances and pensions in USD. Why is that?
The greater irony is that you probably have USD in your pocket, despite your resentment for it. Walk the talk and lead from the front with your embracement.
The Gvt of Zimbabwe, the people of Zimbabwe and businesses all are engulfed in serious corruption and rent seeking. For the Gvt why do they allow fuel to be sold exclusively in USD to a population earning ZWL? Why is the Gvt not transparent on how they are using money from tobacco, gold and platinum?Tuckshops, barbershops, tomato sellers, why always demand USD as if your production costs are all in USD? Mbare magaba, why charge in USD for wire nails, second hand pipes, second hand tyres and zvihuri that were all stolen? This is where our problem is.
‘Zvihuri that were all stolen” are also being charged in forex !😂😂😂😂. It reminds me of what I once saw walking in town, this homeless and somewhat mentally challenged guy was eating some food when a couple parked in a car took out some rtgs to give him, the homeless guy refused😂😂😂,
Its a sad indictment on our currency don’t you think?