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Street traders offer a better bargain than stores as Zimbabwe's currency crumbles

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HARARE, Zimbabwe -

Festus Nyoni picked out a few items in a supermarket in Zimbabwe's capital, looked at the prices and knew she was in the wrong place.

She abandoned her shopping cart and headed for a nearby street jammed with traders offering bargains in U.S. dollars. From the trunk of a car, she picked toiletries, rice and soups. For her two children, a young street vendor dodged traffic to offer her a box of candy.

"I can't keep up with those Zim dollar prices in the supermarket -- it's insane," Nyoni said, referring to the local currency. "For the price of one in the supermarket, I am getting two soaps in the street."

A yearslong currency crisis that forced the 2009 adoption of the U.S. dollar -- one of the world's most reliable assets -- is changing shopper preferences in this southern African nation of 15 million. Many people are shunning brick-and-mortar stores, where prices must be charged in local currency and rise frequently.

On the street, costs are more stable because shoppers pay exclusively in U.S. dollars.

With greenbacks scarce at banks, many people and businesses get them on the black market, making the official exchange rate -- 1,000 Zimbabwe dollars to one U.S. dollar -- that retailers are required to use artificially low. It's double that on the street, so to break even, stores are forced to make their products more expensive.

"Zimbabwe dollar inflation on the black market is on a rampage, so retailers have to constantly change their prices," economist Prosper Chitambara said.

Other countries like Lebanon and Ecuador also have turned to using the U.S. dollar to beat back inflation and other economic woes, with mixed success. Facing Lebanon's worst financial crisis in modern history, many stores and restaurants there are demanding dollars.

Similarly, manufacturers and suppliers are now pushing for payment in U.S. dollars from stores that are forced to sell the same products using the freefalling Zimbabwe dollar, said Denford Mutashu, president of the Retailers Association of Zimbabwe.

"It's currently impossible to purchase goods in U.S. dollars and sell in local currency and recover the money spent," said Mutashu, adding that manufacturers are increasingly preferring informal traders over formal retailers to avoid using local currency.

"The informal market is ready to pay in U.S. dollars. The Zimbabwe dollar is being squeezed out," Mutashu said.

Zimbabwe's economy is inching toward "full dollarization," with the local currency facing collapse, local investment firm Inter-Horizon Securities said. It slumped by 34% in April alone.

Street traders in cars, on bicycles or on foot clog sidewalks, roads and parking spaces. They sell items ranging from groceries to cosmetics, brooms, dog chains, car parts and medicines.

Next to the entrance of a fashion shop, street traders displayed new and secondhand clothing at knockdown prices. Some landlords have divided large buildings into tiny rooms where groceries are sold.

Many young people, including college graduates, end up becoming street vendors, said Wadzai Mangoma, director of the lobbying group Vendors Initiative for Social and Economic Transformation.

"Our prices are not subject to the artificially low official exchange rate, so we have taken over the supply of basic commodities," Mangoma said. "However, competition is also very high because the majority are turning to informal trade for employment."

To stand out, street traders are becoming creative and turning on the charm, a far cry from their usual brazen approach.

One recent day, a driver at a busy intersection gestured about a lack of money to buy anything but got a surprise.

"Take it. It's free today," said a street trader, handing him a comb.

Free gifts, kneeling as if in prayer, cleaning drivers' windows and polite greetings are all part of the act. A man sang and danced while selling electronics to people stuck in a traffic jam.

Street traders are part of the culture in much of Africa, with over two-thirds of people in Zimbabwe employed in the informal sector, the African Development Bank said.

It's a big change: Locals largely worked in formal industries after independence from white minority rule in 1980.

Following early successes, years of corruption, seizures of white-owned farms, frequent currency policy changes, electricity shortages and crippling debt have decimated the mineral-rich country's once-flourishing economy. The government says Western sanctions over human rights allegations have made things worse.

Finance Minister Mthuli Ncube on May 11 announced measures to stabilize the currency and attributed the economic "instability" to "skewed preference for the U.S. dollar as a savings currency." The measures include removing restrictions to allow individuals with foreign currency to import basic goods duty free.

The government also launched gold coins as legal tender last year and rolled out a gold-backed digital currency in early May.

But some analysts are not optimistic.

"I don't expect a significant impact," said Chitambara, the economist. "The government should liberalize the exchange rate and reduce supply of Zim dollars."

Until a solution is found, Nyoni, the shopper, will avoid brick-and-mortar stores.

"It makes better sense to buy from the streets," she said. "At least there is no guessing of prices each time I go shopping."

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