Government cracks down on parallel market pricing

The Zimbabwean government has cracked down on parallel market pricing of foreign currencies and has made it illegal for businesses to charge more than the official exchange rate for goods, news reports said on Thursday. The move, analysts were quoted as saying, was designed to try and funnel scarce foreign exchange back into banks and state coffers.

One US dollar officially trades at 55 Zimbabwe dollars, but fetches up to 350 Zimbabwe dollars on the parallel market.

Analysts said that the new law would be difficult to enforce since traders would simply quote prices in local currency and it would be impossible to determine what exchange rate they used.

Zimbabwean news reports on Thursday said that the new law had not gone down well within the business community. “We are trying to find a way forward. We have been getting calls from our members asking us what to do. We are urging them to act lawfully but we also want to act in a manner that businesses do not collapse because this new measure is going to cause very serious difficulties,” Farai Zizhou, chief economist of the Confederation of Zimbabwe Industries (CZI) was quoted as saying.

“Some of our members were even saying they might have to close shop. We want businesses to go on, and a way forward that accommodates everyone has to be found.”

According to the CZI, the shortage of foreign currency has made it difficult for companies to buy inputs and distribute their products. Industry is performing at about half its capacity and most sectors have had to downsize in the face of the unfavourable economic climate, according to the CZI. “In the short term, manufacturers who are net users of foreign exchange are being forced to suspend operations as they cannot recalculate prices using official exchange rates whilst having obtained foreign currency at parallel market rates due to no fault of their own,” CZI president Jacob Dube said.