BY TATIRA ZWINOIRA ZIMBABWE’s biggest retail chain says headwinds precipitated by steep inflationary pressures would have a huge bearing on its operations in the coming months.
In a trading update for the first quarter ended June 30, 2021, the Zimbabwe Stock Exchange-listed giant warned that business had been held back by lack of a market-determined foreign exchange pricing system.
Inflationary pressures have been building up in the past eight months, knocking off spending power and igniting exchange rate volatilities that have affected companies.
Markets have also been hit by the Reserve Bank of Zimbabwe’s tough inflation containment strategy including an aggressive mop up operation.
The Zimbabwe National Statistics Agency said annual inflation moved to 256% in July, rising 65 percentage points higher than 191% in July, the highest such rate in the region.
OK saw its sales volumes rise by 1% during the period, with inflation adjusted sales values climbing by 40%.
But its biggest concern was the relentless inflation charge and exchange rate fragilities. “Inflation headwinds (are) expected to dominate the trading environment in the short term. Inflationary pressures that gathered momentum at the end of the last financial year have persisted, with month-on-month inflation for June 2022 increasing sharply to 30,7% from 21% in May 2022. Year-on-year inflation for the month of June 2022 was reported at 191,6%, a significant increase from 72,7% reported at the end of the last financial year,” the firm said.
“The market desperately needs a foreign exchange pricing system that is market determined and stable. The willing-buyer-willing-seller interbank market exchange rate against which formal businesses are required to benchmark pricing is not as attractive as the rates offered in alternative unregulated markets. This continues to impact competitiveness of our United States dollar prices, impacting foreign currency collections,” the firm said.
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Currently, formal businesses are required to price their goods according to the official forex rate of about US$1:$488.
The rate was this week hovering around US$1:$800 on the black market, where firms have been sourcing foreign currency to replenish stocks.
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