An interesting trend has taken centre stage in the city of Bulawayo. Small scale shops are now accepting only cash as a means of payment for their goods and services. This is despite the fact that insisting on cash only for payment is in itself against the law. Even more interesting, the goods and services are being charged at as much as 50% less than prices that supermarkets are charging. This is despite the flexibility offered by supermarkets where you can use any form of payment method. This ultimately presents an interesting dynamic where people try by all means to get cash so that they get things at cheaper prices from those small shops. In this article, I outline some of the scenarios brought about by such trends and other related issues.

Consumers Embracing The New Micro-Economy With Both Arms

It seems that most people are actually glad this is happening because of the low prices. Most people are saying it is much better to endure bank queues to access the few ZWL$ they can get to go buy from these small shops. The logic behind most of these people’s thinking is simple; let me illustrate. Suppose you have ZWL$100 either in cash or Ecocash it is regarded the same in a big supermarket like OK. So, in essence, you get less for ZWL$100 cash if you use it in that supermarket but you get way more if you visit those other small shops. It is simply because cash or electronic money is regarded equally in a big supermarket. It is even worse off in that the prices in those supermarkets are astronomically high and not forgetting the charges you incur in transacting electronically.

Small Businesses Cornered Into Doing This

The reality is that business owners need cash in order to easily buy foreign currency from the parallel market. This is because they need foreign to source stock outside the country. Actually, these shops stand to benefit because they get huge returns on selling the cash they receive because it is in itself a commodity nowadays. That could also explain why they can charge reasonably low prices. Accepting electronic payments seriously cripples them because they would then have to source cash first then the foreign currency later. After all, that would be a process involving costs and delays that will negatively affect stocking and re-stocking. Plus that would also disallow them from charging relatively lower prices. So these small shops are doing what they are doing to stay afloat in business given the prevailing economic climate.

Cash Selling Feeds Off From Such Trends

So obviously this is increasing the demand for cash on the streets. Not everyone can access cash from the banks and not everyone can directly get cash. So this development does much in fuelling the increased demand for cash and thus watering the parallel market activities even further.

Big Retailers Being Exposed By This Development

Due to this trend, it is becoming a common conclusion that big retailers are short-changing customers by charging exorbitant prices. The notion that is out there is that the prices being charged by the small shops are reflective of the real prices that must be charged. Some people are even wondering the criteria big supermarkets are using to determine their prices. Again this is capped by the issue of cash still being regarded as equal to electronic money by these supermarkets. This somehow shows that these big retailers are unfairly cashing on customers who use cash. The huge rift between their prices and those of the small shops is clearly indicative of something sinister.

Different Cost Structures May Account For The Difference In Prices

The Retailers Association of Zimbabwe has justified the big retailers saying different costs make up for the differences in prices. For instance, big supermarkets have to contend with a long list costs such as taxes, labour, fees and so on. Whereas the small shops informal are characterised by very low and manageable costs. In fact, the money changing deals they engage in due to their insisting on cash make it easy to cover their costs still leaving room for wide profit margins. Regardless of what is happening, the competition these small shops have triggered is good for overall business activity.

This development unfolding in Bulawayo is not just isolated to that city alone. It is happening all across the country but just at different scales but it is a national trend. As much as the central bank decided on a ZWL$100 daily cash-limit for Ecocash Agents that has not quite helped matters. In fact, cash has become even scarcer and the treatment of cash as a commodity is far from over. While people can queue for meagre daily bank withdrawals it is still a tall order for them to access all their income as soon as they need it. How about those who get paid through Ecocash how do they access to cash in order to buy cheaper goods from these shops? Essentially those who can access cash from banks and those who get cash directly will benefit from these small shops.