The Sunday Mail
We might soon start moving towards price stability, following the major jumps last week in the weighted average on the foreign currency auction.
The interbank rate, which is the official one as a result of the authorities seeking an accurate method of deriving official rates using a pure Dutch auction, also went up last week.
This increase should produce a legal exchange rate that makes sense to business, without hammering the consumer, as these economic agents will no longer lean towards the parallel or black market rates.
But both the authorities and consumers will need to keep an eye out, since there are still some manufacturers and retailers who seem to worship the United States dollar and the black market rate.
If a good chunk of business pricing follows the legal route, this will force the rest to follow.
No one is bound to buy goods where prices have been set through what amounts to a crime.
Consumers should use their power to only do business with honest companies and traders.
When you see the variations between manufacturer prices for almost identical products, it is easy to see the level of economic malpractice.
No one is forced to buy in tuckshops, or supermarkets where you either have to buy US dollars cash on the black market first or pay some incredibly inflated rate in the shop. The new policy of pure Dutch auctions should produce exchange rates that match market forces. Real market forces, not market forces generated by speculators, which have no basis on fact.
The black market has always pretended to be driven by market forces, which is not true, and this will now be made clear.
However, a new problem is now arising, which is the effective dollarisation of prices, especially in the informal markets.
This has been happening for several months now, with longer-term prices quoted in US dollars and then converted at the interbank rate on the day of payment.
In fact, quite a bit of Government procurement follows this pattern as Government remains determined to pay in local currency. Quoting in local currency saw prices changing every day or so, as the interbank rate shifted.
So, it made sense to quote prices in US dollars and then convert at the daily retailer rate, the mid-interbank rate plus 10 percent, on the day the swipe card was presented. This also allowed shoppers to see where US dollar prices were rising, and this was far more common than most people realised as a group of manufacturers decided to profiteer, with their greed hidden under the exchange rate price rises.
Of course, this quoting in US dollars (but being prepared to use the official retail rate when a customer chooses as is their legal right) to use local currency was confined to the respectable wing of the retail and manufacturing sectors.
And it is important that customers insist on using their right to pay for goods and services in the local currency, even when prices are quoted in US dollars, and are prepared to use the consumer hotlines to report any infringements.
We have seen some retailers and manufacturers using a black market rate, and one they appear to have generated by sucking their thumb, or even in the case of the tuckshop sector in insisting on US dollar cash payments.
The problem with dollarisation, de facto or formal, is that it makes Zimbabwean manufacturers uncompetitive, reduces pay and earnings, and dries up all liquidity in the market.
When the country dollarised around 2009 as an emergency measure, salaries were very low, since there were not many US dollars in circulation, liquidity was exceptionally low for the same reason and manufacturers were continuously complaining about competition from South Africa.
The then authorities, starting with the Government of National Unity, did try to increase liquidity by, in effect, digitally printing Zimbabwean fakes of US dollars, and the Second Republic is still cleaning up that mess.
We do not need to go down that road again.
If we retain our present dual currency, we need to have only real US dollars, and one problem, as most are aware, is that quantities of the foreign currency are limited. The worship, in some circles, of the black market rates is difficult to understand, since there is no clear way of calculating those illegal rates, hence the huge variations.
This starts with the bid and ask rates on the streets, with a huge gap between what a dealer pays for a US dollar and what they sell that same dollar for.
Then we have some taking that sell rate and even doubling it, since they assume there will be a collapse in a few weeks.
And then we have simple con artists trying to generate rates that will give them huge profiteering margins.
We might imagine that the black market is a pure market, but it is far from this.
There is not even communication between different elements of that market, let alone a daily fixing in some seedy flat, with the top dealers using little flags, as they move towards a rate of their choice.
With the decision to convert the process of deriving an official rate to pure market forces with the upgrade of the foreign currency auction system, we are likely to finally have a rate that reflects what markets see as true value, but less of the speculating and other horrors of the black market.
This should soon stabilise pricing.
Meanwhile, we must all use our consumer power to stop manufacturers and retailers cheating, simply by restricting our buying to honest businesses.
