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Harare - The falling rand is proving to be a blessing in disguise for neighbouring Zimbabwe, as its struggling consumers now face lower prices for foreign products from countries like China and South Africa.
With the rand/$ exchange rate having breach the R13 mark on Thursday for the first time in 14 years, Zimbabweans now need fewer dollars to purchase the same amount of rands to buy goods and services.
READ: Rand breaches R13/$ for the first time in 14 years
Zimbabwean retailers import the bulk of their goods from South Africa and a falling rand cannot have come at a better time for consumers, whose disposable incomes continue to decline.
A falling rand means Zimbabwean consumers now find travelling to South Africa more affordable too.
In addition, lower prices for foreign products or services has helped keep Zimbabwe's inflation low. Inflation data for the month of July showed that year-on-year inflation as measured by all items was at -2.77%; this was partly because the rand has continued to fall against the US dollar, the major currency in use in Zimbabwe.
Downside for firms
On the other hand, there are disadvantages to the weakened rand, which is bad for local Zimbabwean companies as it will make their products less competitive against imports. Most Zimbabwean firms are now forced to sell goods at marginal prices as they try to compete with South African products that are coming into the country more cheaply.
Some of the country's established businesses such as Delta Corporation, Zimbabwe's biggest brewer, are experiencing the effects of the falling rand or strengthening US$.
Cheap beverage imports from South Africa are easily taking away the company's market share, as they cost less than locally manufactured products.
Further to that, foreign tourists cannot afford to travel and visit Zimbabwe. With the falling rand, the purchasing power of South African visitors into Zimbabwe is ever decreasing.
Zimbabwean markets also become less attractive to foreign investors outside the United States. Zimbabwe has a look east policy, but a strengthening US$ will make China's investments into the country less affordable.
