ZIG Failure Torments Retailers
7 January 2025
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By A Correspondent

Zimbabwean businesses are bracing for further exchange-rate volatility following the shock devaluation of the country’s gold-backed currency, ZiG, in September 2024. The devaluation has had a devastating impact on businesses, with OK Zimbabwe Ltd, the country’s largest retailer, saying it “necessitated a reevaluation” of working capital and risk-management strategies.

Concerned business leaders, interviewed by Bloomberg News, voiced their worries about the ZiG’s instability.

“The velocity, that is the speed of using ZiG will increase,” warned Shelton Sibanda, Chief Investment Officer at Imara Asset Management. “No one will want to keep any ZiG.”

Christopher Mugaga, CEO of the Zimbabwe National Chamber of Commerce, shared similar concerns, stating, “To plan using the local currency is to plan to fail.”

In addition to currency woes, businesses face power shortages lasting up to 18 hours a day.

“The power issue will remain for the first half of the year as it’s linked closely to the hydropower situation in Kariba,” Mugaga explained.

The El Niño-induced drought has significantly reduced water levels at the dam, exacerbating the country’s energy crisis.

Maxen Karombo, CEO of OK Zimbabwe, expects the operating environment to remain challenging, saying, “The operating environment is expected to remain bearish driven by exchange-rate and inflation dynamics.”

As the ZiG continues to struggle, businesses are being forced to adapt to the volatile economic environment.