STUNG by poor cash circulation on the market, Reserve Bank
of Zimbabwe (RBZ) is encouraging local manufacturers to sell their produce
directly to the market as a way of tapping into the money that is circulating
outside the mainstream market.
This comes after Standard reported three weeks ago
that Zimbabwe’s retailers were facing a new threat as companies in the
fast-moving consumer goods (FMCG) sector were now pushing their products
directly to consumers on the streets, bypassing supermarkets and wholesalers in
search of the elusive hard cash.
RBZ governor John Mangudya last week justified the move by
manufacturers to sell their produce directly to the market, saying this would
help bring back money to the formal banking system.
“If you go to the informal sector you will find there is
about 10-15% plastic money while the rest is all cash,” he said.
“What we need to do under these circumstances is to
formalise by ensuring that the bigger companies [manufacturers] sell their
produce to the informal sector and get cash.
“Then they bank the cash. When formal businesses take money
from the formal sector they will be formalising the formal sector.
“As long as the informal sector is bigger than the formal
sector, we have a big problem. Those are the challenges we are facing.”
Mangudya added: “So we need to find ways and means to get
money from them and put the money into the formal sector.
“Those guys who are in the informal sector don’t put their
money in the bank. If Bakers Inn sells their bread to the informal market, they
get cash and money comes to the formal sector because they bank their cash.”
Zimbabwe is experiencing serious cash shortages, with most
people spending nights in bank queues to withdraw as little as $40 cash.
The cash shortages continue to prevail despite the RBZ boss
disclosing that there were $25 million worth of bond coins, $175 million in
bond notes and approximately $800 million in various currencies under the
multicurrency regime in circulation, to give a total of around $1 billion.
Food processor Cairns’ CEO Nancy Guzha told
standardbusiness that the company’s strategy was to service consumers wherever
they were, and wherever they choose to shop from.
“With regards to our products being more available on the
streets, this phenomenon is more reflective of the current macro and
socio-economic environment wherein informal trade has increased,” she said.
“As a business, we continue to sell into retail and
wholesale chains, and most of the products being sold on the streets will have
reached the sellers via these channels.
“In an informal economy, the likes of which you see in most
of Africa, Asia and Latin America, informal selling on the streets is a viable
business option, and it only reduces to the extent that the economy becomes
formal.”
Dairibord CEO Anthony Mandiwanza also confirmed recently
that his company was selling some of its products directly to the consumer at a
discounted rate to get cash.
Confederation of Zimbabwe Retailer president Denford
Mutashu, said the informal sector was an integral part of the value chain and
it was high time government focused on aligning the informal and formal
sectors.
“It is critical that the government focuses on
strengthening the whole value chain for accelerated economic development as
collective efforts to promote production in the country cannot be expedited
without a vibrant retail and wholesale sector,” he said.
“The informal sector is indeed an integral part of the
value chain and it is high time government focuses on aligning the informal and
formal sectors.
“This will improve the overall contribution to economic
revival as a number of informal and unregistered businesses will decline. It
has the effect of causing price distortions as the formal and informal cost
structures differ.”
Financial expert Persistence Gwanyanya said although a lot
of money was circulating in the informal sector, such an intervention was not
the best method to deal with the situation.
“There should be a mechanism of getting that money,” he
said.
“Is such a business model sustainable? Will it provide the
permanent solution?
“Zimbabwe is a consumptive economy, which is highly
informalised. So all the consumption is happening in the informal sector.”
The Zimbabwe Revenue Authority said it could be losing
potential revenue through this new phenomenon. Standard
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