Could Black Markets Become Zimbabwe's Only Market?
One year ago, all 16 checkout lines at OK Zimbabwe supermarket in Harare, a leading retailer in the nation, were bustling with activity. Shoppers stood closely together, their carts brimming with essential items for Zimbabwean pantries. Nowadays, however, merely two cash registers remain operational. These serve only a few patrons who choose from the sparse selection on nearly bare shelves.
Throughout Zimbabwe, the scenario at numerous retail outlets remains consistent. Many of these stores continue operating but face growing shortages on their shelves as more locations shut down gradually. Some have ceased operations altogether due to an inability to match the prices offered by informal vendors.
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.
Due to various progressively worsening factors, Zimbabwe’s official retail industry finds itself struggling to survive. A major contributor to this problem is the nation's fluctuating monetary system. In 2024, the government launched the Zimbabwean gold, referred to as ZiG, designed to replace the inconsistent Zimbabwean dollar with a more reliable alternative. By linking the ZiG to both gold reserves and foreign currencies, the government aimed to reduce inflation and revive trust in their national currency. This was necessary because for many years, people had preferred using the U.S. dollar over their own domestic money.
In Zimbabwe, gold exceeded numerous individuals' projections; however, it did not serve as an instant remedy for the nation's financial instability. On the informal market, where the majority rely on non-official exchange rates, the local currency faced scarcity and had difficulty maintaining its worth. After six months since its launch, the Reserve Bank of Zimbabwe significantly reduced the official exchange rate by over 40% with the aim of aligning it more closely with the black market rate.
In the meantime, the government imposed limitations on licensed sellers as well. They were obligated to set prices according to the officially sanctioned exchange rate and faced criminal charges for charging more than this rate. As a result, prices increased significantly.
Retail customers shifted to informal markets where they could use the US dollars they still favored, taking advantage of the more favorable rates available in the black market.
Instability is expected to persist as US dollars grow scarcer after the withdrawal of American aid. A significant portion of this assistance was channeled via the US Agency for International Development, a major supplier of foreign currency into 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 mother 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 almost a year. Large chains such as Spar Zimbabwe and N Richards Group closed several outlets across different areas of the capital city. According to a statement released by the Confederation of Zimbabwean Retailers in January, certain businesses decreased their retail spaces by up to 60%.
In April, OK Zimbabwe signaled a potential loss, aiming to secure $30 million and detailing the economic hurdles faced 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 tremendous success—these individuals form a substantial portion of the informal sector, which accounts for roughly 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 now increased their share even further.
This market potential might expand even more. According to Admire Musa, who works as a cashier at one of these stores in Harare, informal vendors frequently deplete their stock because of strong customer interest. He also mentions that this prosperity has encouraged other Zimbabweans to establish comparable retail outlets.
According to a 2024 report from the Zimbabwe National Chamber of Commerce, manufacturers who previously provided goods to formal retailers on credit 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 Brains Muchemwa, an economist. He points out that such extensive under-the-table transactions might pose issues for the nation. These practices substantially decrease governmental tax income since informal merchants often 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 is worrying that I might buy fake products without knowing, but the prices are pushing us to these informal markets."
Mirriam Masikati
To tackle the rising tide of informality, the government implemented a new monetary strategy in February. They mandated that every business must utilize point-of-sale devices. The aim was to integrate informal trading activities into standard banking systems.
However, Muchemwa remains doubtful. He argues that the informal sector flourishes due to its ability to bypass regulatory requirements. Unless the government implements consistent policies and fosters a supportive business climate, their initiatives "won’t produce any outcomes," according to him.
Prosper Chitambara, who is also an economist, argues that the nation requires tax reform aimed at making it simpler and less costly for enterprises to become formally established. He cites Brazil and Uruguay as positive instances where streamlined taxation systems coupled with favorable legislation have successfully decreased informal business activities.
According to Muchemwa, the answer is straightforward: "If we keep rejecting rational economic management practices such as printing money and implementing nonsensical policies, these issues will persist and pose ongoing difficulties for our economy."
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 proper regulations and consistent exchange rates are essential, noting that the administration is making progress toward these goals.
At the same time, Mercy and other employees in the retail sector continue to feel uneasy about what lies ahead. "There’s a general lack of motivation among everyone; some have even been let go from their positions," she explains, her voice dropping with exasperation. She adds, "For those of us still working, our paychecks aren’t arriving when they should, and often we only receive part of what we’re owed."
- Gamuchirai Masiyiwa serves as a Reporter-in-Residence located in Harare, Zimbabwe.
