Lately, we have been hearing a lot about foreign exchange auctions. The foreign exchange auction system is something that many might not understand. Bear in mind that this is not confined to Zimbabwe alone – it is something that is being done or has been done in other countries. It is a system whereby the central bank (RBZ in our case) either buys, sells or matches buyers and sellers of foreign currency. The outcome of that is that an official interbank rate is adopted as a result of the auction. Though it has it’s shortcomings it is the official rate. Statutory Instrument 185 of 2020 amendment published Friday the 24th of July brought into law the dual pricing at the auction exchange rate.
Premising Tariffs On Prevailing Exchange Rates
The dynamics I have briefly highlighted at the beginning have led to this arrangement. Telecoms operators are now basing their tariffs on the prevailing exchange rate. This also means they can now bill their services using US dollars. This all has been approved by the Postal and Telecommunications Regulatory Authority of Zimbabwe (POTRAZ). This leads to steep costs for ordinary users to pay for their telecoms service packages. Let me quote what POTRAZ specifically said in a recent communique:
POTRAZ’s Recent Communique
“To facilitate dual pricing under the new exchange rate regime, the authority hereby advises all licenced postal and telecommunication operators that the implementation of the dual pricing system shall entail converting the current ZWL tariffs to USD denominated tariffs at an exchange rate of USD1: ZWL25 to arrive at the base USD denominated tariffs. The USD denominated base tariffs will then be converted at the ruling exchange rate as determined by the auction system, to arrive at ZWL denominated tariffs. The ZWL denominated tariffs shall be reviewed from time to time in line with the auction determined exchange rate movements, as and when necessary, depending on the magnitude of the movements.”
Implications Of The Communique
This essentially means that telecoms operators can now dually price their services. SI 185 of 2020 is the basis for that new setup. Part of the statutory instrument reads as follows, “Any person who provides goods or services in Zimbabwe shall display, quote or offer the price for such goods or services in both Zimbabwe dollars and foreign currency at the ruling exchange rate”. Not doing so will attract a category 1 civil penalty if the contravention is completed and not irremediable. If the contravention is a continuing one, a category 4 civil penalty will be given.
Given that the exchange rates are continuously moving this means price reviews will become frequent. All these developments are welcome especially on the part of the telecoms operators. This emanates from the fact that most of their overheads require foreign currency. Thus to be able to peg their prices based on the exchange rates plays out favourably for them. The same cannot be said for the consumers though, the majority of whom have paltry Zimbabwean dollar-based incomes. Telecoms operators have been blaming the local currency-based pricing system for their poor network performances lately. We have been experiencing dismal network performances these days; even NetOne is no longer as efficient as before.
NetOne Already In The Mix
NetOne, on the 28th of July, announced new tariffs in line with the POTRAZ communique. Other operators shall follow suit soon. I will just briefly point some of the new tariffs for you to get a feel. NetOne calls now cost ZWL$4.11 or 6 US cents per minute. Local SMSes are now at ZWL$1.09 or 2 US cents per SMS. Data has been placed at ZWL$0.84 or 1 US cent per megabyte (MB). Floating rate used was 1:72.147. These new tariffs are effective on the 29th of July. Looking at the new data tariffs it would mean that 10 gigabytes (GB) will cost roughly ZWL$8400. How many people can afford, let alone earn that as a monthly salary? People are already crying out because the tariffs are sky-high. The irony is that the networks are poorly performing yet tariffs have gone up.
People have also expressed concerns on whether or not they can purchase airtime using US dollars. It is cheaper to buy the airtime using US dollars. So it is yet to be seen if the telecoms operators will make available airtime that can be paid for in US dollars (using cash or electronic means). At the end of the day, ordinary consumers are left in dire straits as service providers seek to stay afloat. This is a typical scenario that characterises Zimbabwean commerce most of the time.