October 19, 2018
October 19, 2018
A new pricing system is the latest indication that Zimbabwe’s economic crisis is fundamentally changing how the country does business. Some vendors and consumers are praising the system – so why are the authorities discouraging it?
BULAWAYO, ZIMBABWE — Nomalanga Mthethwa moves from one supermarket to another, ferociously browsing each section for a bargain. When she can’t find what she needs, or some items are over her budget, she turns to street vendors on the crowded sidewalks of Bulawayo, Zimbabwe’s second-largest city.
Shopping for groceries and household items is time consuming, she says, but with prices for basic commodities skyrocketing, she has no choice but to spend hours hunting for affordable products.
Street merchants, estimated to be a third of Zimbabwe’s work force, are making this task a little easier, she says. Many of them offer low prices on the items on Mthethwa’s shopping list and are willing to reduce those prices depending on whether a customer pays with cash; plastic money, a common local term for debit cards; or mobile money, an electronic remittance service that only requires a mobile phone.
“In some supermarkets, a packet of Maq washing powder costs $8.50,” Mthethwa points out. “With street vendors, Maq costs $4.75 when paying with cash and $5.20 when using mobile money.”
As this pricing system, locally called the multi-tier pricing system, gains popularity with some of Zimbabwe’s consumers and salespeople, others deem it an inconvenience. Zimbabwe’s authorities have issued several statements in the past year, warning vendors to stop using the pricing system, which they say is discriminatory to buyers. But with few signs of improvement to the country’s sputtering economy, some informal traders say ignoring the warnings is the only way to stay in business.
Fortune Moyo, GPJ Zimbabwe
Cash availability became even more of a challenge when on Oct. 1 a new government policy eliminated U.S. dollars from bank accounts throughout the country and replaced that money with a new monetary unit that some central bank officials say should be called a “local dollar.” While the value of that dollar is still cause for debate, the value of the country’s bond note is fluctuating wildly.
As of Oct. 17, Zim Bollar Index, which tracks Zimbabwe’s exchange rates and posts them on Twitter, announced that a U.S. dollar was worth 250 percent of a Zimbabwean bond note. Just one day before that, the dollar was worth 180 percent of the bond note. On the black market, the exchange rate varies daily too – on Oct. 18, $100 was equivalent to 300 bond notes.
In a February 2018 report, the Reserve Bank of Zimbabwe (RBZ) cites multi-tier pricing as the cause of massive price hikes on goods and services, but informal-sector workers list other reasons, among them the black-market exchange rate, the scarcity of foreign currency and the bank’s most recent efforts to fix the economy. Among the new set of monetary policies announced on Oct. 1, foreign traders are now required to use foreign currency when buying goods in Zimbabwe for sale in neighboring countries.
Ronald Musume, a clothing vendor for the past six years, has been relying on the multi-tier pricing system since the bond note was introduced. Musume says he charges customers $18 for a pair of men’s trousers if they choose to pay with mobile money, and $16 for cash transactions.
“If I do not do that, I run at a loss because I need to buy foreign currency at a high rate from the black market to go order my goods from South Africa,” he explains, as he sorts through his merchandise.
Musume says he’s not sure what penalties he’ll face if authorities catch him using the multi-tier pricing system because there is no law that prohibits it. Musume also says he hasn’t heard of anyone who has been arrested or fined for what the authorities are calling an offense. Still, some vendors are panicked and have stopped displaying different prices at their stalls to avoid getting caught by the police, he adds.
Fortune Moyo, GPJ Zimbabwe
Dumisani Mloyi, who sells accessories along some of the busiest streets in Bulawayo, also uses the multi-tier pricing system. He prefers for most of his customers to pay with mobile money, because mobile-money transaction fees are less than debit-card transaction fees, he says. Mloyi, however, accepts cash for items $2 and below, he says.
James Runako, a student at Lupane State University and an uncompromising bargain hunter, is a fan of the multi-tier pricing system. Runako doesn’t have a bank account. He says his family sends him a monthly allowance, in U.S. dollars, through MoneyGram, a global money transfer service.
“I then change it to bond notes on the parallel [black] market and do my transactions in cash, making most of my purchases cheaper,” he says.
But Gertrude Dube has a different take on the pricing system. She says it isn’t saving her money.
“I receive my salary through a bank,” says the primary school teacher, who’s lost confidence in the country’s economy. “So, I am forced to use my swipe [debit] card at all times for most purchases.”
Those who use cash often pay the lowest amount for basic commodities, she adds. Dube says she can only withdraw 50 bond notes from the ATM each week, and she uses the cash for commuting. Most public transport operators only accept cash.
Victor Tinashe Bhoroma, a business analyst, says the pricing system discriminates against potential buyers such as Dube, especially since cash is hard to come by. But Musume feels that most of his customers don’t mind it.