By Staff Writer



The disparity between the Reserve Bank of Zimbabwe (RBZ) auction exchange rate and the alternative market remains a concern to the businesses and a source for arbitrage. This week a single unit of the United States currency will trade for ZW$84.12 whilst last week’s auction saw it trade for ZW$83.98 following another depreciation.



On Wednesday, US$1 fetched up to 100 bond notes on the street and more for RTGS dollars. Most shops currently use a rate of ZWL$105 cash per US$1 but when you sell on the streets you will likely only get about ZWL$100. The parallel market US dollar sell rates ranged between RTGS 125-130 while the buying rate ranges from RTGS110-120.



Movement in unofficial market exchange rates have a bearing on the Zimbabwe Dollar value of materials and services consumed by companies. Forex traders have been taking advantage of the arbitrage by moving electronic funds across banking and mobile money platforms which they then use to buy the greenback from the streets whilst crediting the mobile wallets of those selling the forex.



Property firm Mashonaland Holdings recently cited that its operating expenses for the first quarter ended 31 December 2020 increased driven by inflationary pressures as most service providers are continuing to peg prices of services in line with parallel market exchange rates. This comes despite firms still nursing the wounds of the previous Covid-19 induced lockdowns.

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Experts still question the viability of exporting using the auction rate when the inflation rate is being guided by the parallel market rate. At the moment exports of some firms are a bit marginal because of the difference between bank rate and market rate.



The African Development Bank (AfDB) has already projected that Zimbabwe’s economy will grow 4.2% this year and 3% in 2022 if effective measures are taken to stabilize foreign exchange and avoid excessive money creation.



Simbisa Brands, which doubled first half revenue to ZWL$8 billion (+44% in Zimbabwe and +500% in the Region), said it has put in place strategies to hedge against currency vulnerabilities in the region which includes locally procuring capital expenditure, stock and expenses where possible and structuring borrowings in local-currency in all operating markets to minimise our exposure to US-Dollar obligations and therefore hedge against forex movements.



In the Region, whilst revenue fell by 14% in USD terms, driven by a 19% decline in customer counts offset by a 6% increase in average spend, translation into Zimbabwean dollars reflects a 500% growth.



The southern African nation has been undergoing political and economic transformation for the past three years. Adoption of the foreign currency auction system, in place of a fixed rate, has been hailed as a step in the right direction in terms of bringing sanity in the markets. However, there have been calls for total independence of the auction system to ensure that the exchange rate reflects the true value of local currency.



In the six months ended 31 December 2020, Choppies Enterprises said the changes and volatility of the Zimbabwean currency makes operating in this market extremely difficult, as gains obtained at country level gets eliminated when converted at group level due to the weak currency when compared to the Botswana Pula. Revenue for its Zimbabwean operations retreated to P211.4 million from P268.6 million in the comparative period.



Some service providers are continuing to peg prices of services in line with parallel market exchange rates.



The behavior of regional currencies throughout the region vis-à-vis the US dollar may impact import and export parity prices. In the context of Covid-19, many regional currencies have started to depreciate due to declining export earnings which may affect import and export parity prices. Experts say the current economic crisis in Zimbabwe will likely continue putting upward pressure on prices.



The liquidity crisis in Zimbabwe is expected to continue in the short-term with an enduring negative impact on household purchasing power as staple food (including maize) and fuel prices remain at exceptionally high levels, according to the Famine Early Warning Systems Network – Harare

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