On the left, Wellington Kaseke and Oasis Ishingwe cater to customers and accept US dollars at an impromptu grocery store commonly referred to as a tuckshop. Such unregistered enterprises have thrived as traditional stores face difficulties, with many Zimbabweans now favoring American currency over the nation’s recently introduced gold-backed money.
Photo Credit:
Gamuchirai Masiyiwa, GPJ Zimbabwe
This tale was initially released by
Global Press Journal.
HARARE, ZIMBABWE — One year ago, every single one of the 16 checkout lines was bustling at OK Zimbabwe supermarket in Harare, which stands as one of the nation’s key retail outlets. Crowds lined up closely together, their shopping carts brimming with staple goods essential for Zimbabwean pantries. Nowadays, merely two cash registers remain operational. These cater to just a few shoppers choosing items from sparse shelves nearly devoid of stock.
Throughout Zimbabwe, the scenario is similar at numerous retail outlets. Although some continue operating, they find themselves progressively bereft of stock, leading to individual store closures. Many others have ceased trading altogether due to their inability to match the competitiveness of informal sellers.
It wasn’t always like this,” remarks Mercy, who has been employed at OK Zimbabwe for more than a decade and requested anonymity out of concern for potential job loss. “Customers aren’t visiting our stores anymore.
Previously bustling, numerous traditional stores throughout Zimbabwe have ceased operations due to economic upheaval, an erratic monetary system, and heightened rivalry from the unregulated market segment.
Photo credit
Gamuchirai Masiyiwa, GPJ Zimbabwe
Zimbabwe’s formal retail sector is finding it increasingly difficult to survive because of several factors that have progressively worsened over time. A major contributor to this challenge is the nation’s fluctuating currency system. In 2024, the government launched the Zimbabwean gold, known as ZiG, intended to replace the volatile Zimbabwean dollar with a more dependable alternative. By linking the ZiG to both gold and foreign reserves, the government aimed to reduce inflation and rejuvenate faith in their national currency, which for years has faced stiff competition from the widely favored U.S. dollar.
Zimbabwean gold exceeded many people’s expectations,
However, it did not serve as a magical solution for the nation’s economic upheaval.
On the black market, where most people relied on informal exchange rates, the currency was scarce and had difficulty maintaining its worth. Six months following its launch, the Reserve Bank of Zimbabwe reduced the official exchange rate by over 40% in an attempt to align it with the black market rate.
In the meantime, the government imposed limitations on legitimate stores as well. These establishments were mandated to set their prices according to the official exchange rate and faced criminal charges for charging more than this specified amount. Consequently, this resulted in increased pricing across products.
Retail customers shifted towards informal markets where they could use the U.S. dollars they still favored, taking advantage of the more favorable rates available in the unofficial market.
Instability is expected to persist, as the scarcity of US dollars sets in after the withdrawal of American aid. A significant portion of this funding was channeled through the US Agency for International Development.
This has been a crucial source of foreign currency earnings for Zimbabwe.
Miriam Masikati, who previously favored supermarkets for their superior product quality, now finds better value at these informal markets. “I am concerned about potentially purchasing counterfeit items unknowingly; however, the pricing is driving us towards these informal marketplaces,” explains the parent of three children.
Even though the government canceled the rule in April that mandated formal stores to set prices according to the official exchange rate, the harm was largely done over the course of almost a year. Prominent businesses such as Spar Zimbabwe and N Richards Group closed several outlets across different areas of the capital city. According to a January report from the Confederation of Zimbabwean Retailers, certain stores had decreased their retail spaces by up to 60%.
In April, OK Zimbabwe signaled a potential loss, aiming to secure $30 million and detailing the financial hurdles encountered over the past half-year. These issues included struggles with keeping inventory levels up, settling payments to suppliers, and fulfilling various monetary commitments.
On the contrary, informal traders are experiencing remarkable success—these individuals form a substantial portion of the informal sector, which accounts for approximately 65% of Zimbabwe’s economy and provided around 72% to the nation’s GDP in 2024. These traders were already well-established in the marketplace, but they have since increased their share significantly.
This growth potential may increase as informal traders frequently exhaust their stock because of strong demand, according to Admire Musa, who works as a cashier at one such store in Harare. This prosperity has encouraged other Zimbabweans to establish comparable businesses, he adds.
According to a 2024 report by the Zimbabwe National Chamber of Commerce, manufacturers who previously offered credit terms to traditional retailers are now shifting their focus towards informal traders, who settle payments with U.S. currency.
This enables manufacturers to circumvent the banking system and evade taxes, according to economist Brains Muchemwa. He warns that such extensive underground trade might pose issues for the nation. The situation notably diminishes the government’s tax income since informal merchants disregard regulatory requirements, he further explains.
According to a 2022 report from the Zimbabwe Revenue Authority, under 0.5% of earnings within the informal sector contribute to tax revenues.
It’s concerning that I could unknowingly purchase counterfeit goods, yet the pricing is steering us towards these unofficial markets.
Mirriam Masikati
To tackle the increasing informality, the government implemented a financial strategy in February mandating that all enterprises utilize point-of-sale devices. The aim was to integrate underground commerce into standard banking systems.
However, Muchemwa remains doubtful. He argues that the informal sector flourishes due to its ability to bypass regulatory obligations. Unless the government establishes consistent policies and fosters a supportive trade atmosphere, their initiatives “won’t produce any outcomes,” he contends.
Prosper Chitambara, who is also an economist, argues that the nation requires tax reform measures that facilitate and lower costs for businesses aiming to go official. He cites Brazil and Uruguay as positive instances wherein streamlined taxation systems coupled with favorable legislation have lessened informal practices.
For Muchemwa, the answer is straightforward. “If we keep rejecting rational economic management practices, such as issuing currency irresponsibly and implementing nonsensical policies, these issues will persist and pose ongoing difficulties for the economy,” he states.
The nation’s faltering economy presents an opportunity for retailers to evolve, according to Mthandazo Mlotshwa, the chief operating officer at Zapalala Supermarkets. Despite closing several outlets, Mlotshwa stays positive and does not view the informal sector as competition. However, he emphasizes that better regulations and consistent exchange rates are essential. He notes that the government is making progress toward these goals.
In the meantime, Mercy and other retail employees continue to feel uncertain about what lies ahead. “There is a lack of motivation among everyone; some have already lost their jobs, and those of us still working face delays in receiving our wages. Often, we only receive part of our salary,” she explains, her voice tinged with disappointment.
Gamuchirai Masiyiwa
serves as a Reporter-in-Residence located in Harare, Zimbabwe.
Provided by Syndigate Media Inc. (
Syndigate.info
).
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