Frampol’s Starlink Pandora’s Box – The Zig Rate and Compliance vs Market Reality

While most of the articles that I’ve put out recently have been centred around Starlink help guides, with the news that came in yesterday of Starlink having gone live in Zimbabwe revealing its pricing of both hardware and subscriptions, a number of people will be watching closely as to what those who are reselling locally as registered Resellers will be pricing their units at, based on our very distort exchange rate regime in the country.

Just recently Bulawayo Mayor, and former Minister of Education in Zimbabwe, Senator David Coltart tweeted out to Starlink and Elon Musk asking about what will definitely prove to be a pandora’s box for any local Reseller:

@elonmusk thought you might be interested in what is alleged will be the price of @Starlink in #Zimbabwe. Surely Starlink must have reasonably standardised prices world wide? If this is correct it is ridiculously high.

With Frampol becoming an Official Starlink reseller, this is probably an open piece to them (or any other business that’s working to become a Starlink Reseller in Zimbabwe). The current economic environment in Zimbabwe suggests that Frampol could soon find itself in a spot of bother. 

Zimbabwe has been facing currency issues since the longest. Some may say it started in 2000 with the farm invasions, some may say it started in 1998 with the war in DRC, whilst others will say it started in the early 1990s with ESAP. Whichever date you pick, we can say that there is no ama2000 (someone born during or after 2000) who knows what a stable economy is in Zimbabwe.

I’m of the mindset that we all need therapy due to the way the economy has violated us time (2000) and time (2008) and time (2016) again (2023-2024!)! Anyone who was probably 18 or above during any of these periods have tasted what an unstable currency can do (forever rising prices, unemployment, lack of basic services, etc) and because this has been prolonged “crazy is the new normal”.

Anyway, on to the dilemma that any Starlink Reseller will face, including Frampol…

Our dear old Reserve Bank of Zimbabwe (RBZ) requires all businesses that price their products and services in foreign currency (typically USD) to also quote and allow people to pay in the local currency (ZWG). When the local currency is priced, it must be pegged at the official bank rate, which at the time of writing, stands at approximately 14.5 ZWG/USD. On paper, this seems straightforward: a business with demand for foreign currency should be able to walk into any bank and purchase it at this rate. However, in reality, Zimbabwe’s trading market has been plagued by a chronic shortage of foreign currency, making this virtually impossible for most businesses.

If a business tries to sidestep these regulations by setting prices differently or charging exclusively in USD, the consequences can be severe. Not only could the RBZ have their bank accounts suspended/closed and label them as economic saboteurs, but the directors could also face arrest, and the entire operation might be shut down. The RBZ’s strict enforcement of these rules should be a significant deterrent for any business trying to operate outside the official guidelines, however, the sad reality is it’s sink or swim when it comes to foreign exchange in Zimbabwe.

Now to the interesting part. Enterprising Zimbabweans have a knack for turning even the most rigid systems to their advantage. Due to the discrepancy between the official exchange rate and the black market rate, there’s a lucrative arbitrage opportunity that allows them to buy a product, sell it for less than the purchase price, and still make a profit!!! And the Government is alive to this opportunity.

Let’s use Starlink’s service as an example. Suppose Frampol sells a Starlink kit for US$350, which is the Recommended Retail Price in Zimbabwe. According to the official exchange rate, this would be equivalent to around 5,075 ZWG. However, the street rate for ZWG is much higher, typically ranging between 22-24 ZWG/USD. For simplicity, let’s use a conservative street rate of 20 ZWG/USD. At this rate, a resourceful Zimbabwean could effectively buy a Starlink kit for just US$273.75, pocketing a 38% discount—purely thanks to the exchange rate difference.

This situation puts Frampol in a difficult position. They’ll need to source USD at the official rate to restock Starlink equipment. If they can’t, they’ll either have to absorb the losses or face the wrath of Zimbabwean consumers and competitors, who will likely cry foul over the perceived unfair advantage. After all, other telecom companies are forced to offer their USD prices in ZWG at the official rate (often seeing them making losses), while Frampol might be seen as getting a ‘free $200 every time they pass BEGIN,’ as it were.

Given these circumstances, Frampol should be cautious. The Zimbabwean market is complex, and the RBZ’s policies can be a minefield. But the real challenge will be navigating the arbitrage opportunities that Zimbabweans are bound to exploit. Whether Starlink services in Zimbabwe will eventually be sold exclusively in USD, similar to fuel and airline tickets, remains to be seen. But one thing is clear: Frampol, tread carefully. Zimbabweans are experts at playing the system, and you could find yourself caught in the crossfire between regulatory compliance and market reality. 

If Frampol chooses to sell at a price that is favourable to them (US$460) and probably cushions them if they’re forced to take ZWG, then this price will be above the RRP of Starlink that they will give to Resellers.

Another predicament is that Starlink are also selling direct to the consumer (and businesses) so the true RRP of Starlink will be very evident and a deviation from that will have consumers thinking either it’s better to deal directly with Starlink or that Frampol are out to fleece them.

In conclusion, Frampol, you’re entering a market where the rules are constantly changing, and the stakes are high. The Zimbabwean consumer is resourceful, and the economic environment is challenging. But with careful planning and a deep understanding of the local context, you might just navigate these waters successfully.