PRESIDENT Robert Mugabe’s government recently threatened to crack down on “errant retailers” after a spike in prices of basic goods triggered fears of widespread shortages. Mugabe promised tough action against alleged saboteurs he said were behind the price increases. The Financial Gazette’s Markets Editor, John Kachembere (JK), spoke to the Confederation of Zimbabwe Retailers president, Denford Mutashu (DM) to understand the reasons behind the pricing hikes and other challenges affecting the retail sector. Below are excerpts of the interview.
JK: What is the current status of the country’s retail sector?
DM: The retail sector currently is facing a lot of challenges ranging from the seemingly never-ending liquidity issues, inability to keep pace with price increases from certain suppliers and manufacturers, dissatisfied customers and a lack of access to capital to recapitalise businesses. Vending is also rearing its ugly head and spreading like veld fire, while authorities are sleeping on duty. Licences are too many. Cooking oil supply is improving but not at the rate the sector anticipates. There is a sharp rise in the number of unregistered businesses in the country that have to compete with formal retailers and the wholesale sector. Cash barons have captured the financial services sector and cash premiums skyrocketed a few weeks ago. Multi-tier pricing is rampant.
JK: The retail sector has been accused of taking advantage of the currency crisis by wantonly and illegally increasing prices of basic goods. What is your comment on this?
DM: The retail sector has been conveniently blamed whenever there are challenges that require attention in the economy. It’s like shooting the messenger because the manufacturers and consumers meet in the retail and wholesale sector. There is usually this tendency of ignoring the real challenges in the economy by focusing on the symptoms like price increases. A price increase is normally a sign of rising cost of production or indicates challenges on the supply side. When the market floods with goods and services, prices stabilise and in most cases take a downward spiral.
JK: How have the current foreign currency shortages affected operations in the retail sector?
DM: The foreign currency shortages affect not only the retail and wholesale sector but the general smooth flow of business. Manufacturers are also grappling with the issue hence shortages of selected goods and subsequent price increases. The economy is unbalanced. Government should ensure it doesn’t resort to price controls. Production, efficiency and the cost of doing business in the country requires further attention and a political will.
JK: The Reserve Bank of Zimbabwe has repeatedly accused your members of not banking their daily takings, thereby fuelling the informal foreign currency market. What do you say about this?
DM: For those that are doing it, it’s bad. Let’s bank our money. But the sector prays for a corresponding efficient policing of the whole financial services sector and investment in confidence building for people and business at large to place their trust with local banks. The cost of banking is a deterrent. You can’t leave your money in the bank account for a long time and expect it to grow; it will be wiped off by bank charges. So it is also prudent for the Reserve Bank of Zimbabwe to start asking itself hard questions like, why are people not banking? Is there anything we can do to improve the environment? Are banks acting responsibly to those that bank? If it finds answers to those questions, surely the apex bank can also find the solutions. The black market itself is a symptom of shortage of foreign currency in the formal financial services sector. It is a symptom of a mismatch on supply and demand for foreign currency. The country needs a targeted export drive strategy.
JK: From where you stand, how do you think these challenges in the retail sector can be solved?
DM: The country has to increase support for production and exports. If we are sitting on over 13 tonnes of gold in the country yet we continue to face such challenges like foreign currency, it shows that something is not right with our preferences. We are endowed with natural resources, good agricultural soils, hardworking people (human capital), infrastructure base that requires revamping and many other possibilities.
Have we failed to deal with parastatals’ inefficiencies? Can we not reduce government expenditure surely and increase support to the productive sectors? It is quite achievable if there is will. The challenges in this economy are structural. We may blame the RBZ all day, but without addressing the fiscal side of the economy we will remain in a crisis.
JK: There are sentiments that the Confederation of Zimbabwe Retailers has gone to bed with the government and no longer represents the interests of its members as well as the people. What do you say concerning these allegations?
DM: Not all indications are indicators. CZR has done a tremendous job behind the scenes and our approach to issues will remain the same, dialogue. We are doing more work now than ever. Our work speaks volumes and the good results are out there to see. We have not gone to bed with the government because the bed hasn’t even been bought in the first place. So those allegations are simply what they are, malicious and with the intention of causing harm. We are not perturbed and will continue to represent the sector and the people without fear or favour.
JK: Where do you see the country’s retail sector in the next five years?
DM: The retail sector is growing in form, size and impact to the economy. The sector will increase its contribution to the GDP from the current average of 56 percent to at least 60 percent in the next five years. Plastic and mobile money will dominate transactions and contribute an average 95 percent from the current 75 percent. Consumers will have embraced alternative methods of payments and move away from cash transacting.
The sector will increase its contribution to the fiscus and by 2020, all businesses in the country will be registered. Vending will have been organised through construction of vending malls that house all informal players by trade. China is a good example on that regard. The retail sector in Zimbabwe can grow exponentially whenever the business environment is stable and confidence issues are addressed.
JK: What else would you want to say to your various stakeholders?
DM: The CZR will continue to advocate and lobby for the improvement of the retail/wholesale environment. We appeal to the sector players to adopt best practices. Speculative behaviour and profiteering should not dictate our business decisions. Let’s do the best we can to protect our customers and not short change them. The government is called upon to help address multi-tier pricing through double efforts on confidence restoration on the market. We are happy about the move on cash barons though a lot can be done as we have only witnessed arrests of seemingly small fish. As the country gear itself for a watershed election in 2018, we appeal to politicians to ensure peace and love prevails in the country. We say ‘no to violence’.