HomeBusiness DigestMugabe win sends markets in panic mode

Mugabe win sends markets in panic mode

Wholesalers and retailers’ tills are ringing faster as Zimbabweans splurge on key commodities as uncertainty over what the new government might do with regards to the currency grips Zimbabweans.

Fidelity Mhlanga

A snap survey by businessdigest this week shows that while wholesalers are enjoying good business in the pre and post-elections period, the business is coming on the back of fears President-elect Robert Mugabe, who has ruled the country since Independence from Britain in 1980, could order the central bank to introduce the Zimbabwe dollar to operate alongside multi-currencies or bring back the Zimbabwe dollar altogether.

With vivid memories of the yesteryear food shortages still fresh in the minds of many, Zimbabweans fear a throwback to years of economic hardships caused by hyperinflation and general economic mismanagement.

If Mugabe follows through on threats to bring back the Zimbabwe dollar, analysts see economic stability and growth achieved in the last four years going to waste.

The survey revealed that there was an upsurge in the purchase of commodities by both individual and shop owners in the city wholesalers in both the pre and post-elections period.

Gift Hungwa, floor manager at Tynserv distribution centre, said bulk buying of commodities by customers could have been prompted by political uncertainty. Consumers were in panic mode and sought to desperately cushion themselves from a repeat of the 2008 food crisis.

“When we opened on Monday business was high. When people heard of the rise in fuel prices, they rushed to purchase goods. There was bulk buying by both individual and shop owners who were afraid of an immediate shortage of goods,” he said.

In the wake of a Zanu PF victory, speculation was rife that South Africa would re-introduce visa requirements and the Zimbabwean dollar would return, which drove consumer goods demand up.

Hungwa said that both in the pre and post-elections period, consumers were in a rush to procure basic commodities presumably due to political uncertainty. There was also a fear of incurring huge costs when buying goods outside the country aggravated by visa payments.

A Graniteside wholesaler reported that before the general elections, uncertainty gripped most Zimbabweans prompting a sharp rise in commodity purchase.

The period after polls marked another sharp increase in commodity demand characterised by robust purchases of goods due to fear of price fluctuations and scarcity of products, he said.

Among some of the most purchased goods were cooking oil, rice, flour, sugar, salt and washing soap.

Wholesale operators who spoke to this paper are concerned fuel price increases in South Africa would have a negative impact on the distribution of imported goods in light of price fluctuations of imported goods.

There is also fear the re-introduction of tax on imported basic commodities from South Africa will trigger commodity shortages in the country.

One of the consumers who was buying a huge pile of goods at Bhadhella Wholesalers identified as David Choruma said he would stock goods in bulk despite newspaper reports saying there was not going to be an immediate return of the Zimbabwean dollar.

It’s not all about the Zim dollar.

The Zimbabwe Stock Exchange (ZSE), which had advanced a solid 51,72% since the beginning of the year, despite political uncertainty in the run-up to the general elections held on July 31, showed all was not well as negative investor sentiment gripped the market when Mugabe was declared the winner.

On the first day of trade this week, the mainstream index lost a solid 11,09% on the day trimming down the year-to-date return in a single day from 51,72 to 34,89%. Market capitalisation fell by a strong US$626,33 million to US$5,41 billion.

It would appear that losses on the ZSE were driven by panic selling.

An analyst with a local bank this week said the reason behind the slump of the local market on Monday could be investor uncertainty with regards to the future of the economy or maybe they had expected a different result.

“Also the fact that the elections are being disputed by the opposition with allegations of massive rigging does not instil confidence in an already fragile market. There are a lot of questions that remain unanswered, chief among them the future of the multi-currency system and uncertainty with regards to economic policies that are likely to be pronounced by the new government,” the analysts said.

Apart from fears the Zimbabwe dollar might make a comeback, others are worried over what the new administration would do to deposits and money sitting in banks.

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