Exchange Rate Policy Dynamics in Post-2017 Zimbabwe: Implications for Foreign Investor Confidence and Retail SME Activity

This research investigated the perceived effects of Zimbabwe's volatile exchange rate control measures adopted post the political change of late 2017 on foreign investor confidence and the operational experiences of local Small and Medium-sized Enterprises (SMEs) experiences within the retail sector.This study adopted a qualitative design under the interpretivist philosophy.It employed secondary data from academic and grey literature, government reports, and reputable international economic analyses to understand the views of foreign investors and local retail SMEs.Thematic and Content analyses were applied to render meaning from the data, through a theoretical lens of Institutional Theory (North, 1990;Scott, 1995), and Signalling Theory (Spence, 1973).Regarding the findings, the analysis identifies a number of overarching themes.The environment is characterized by a widespread lack of policy predictability and an endemic trust deficit resulting from frequent and inconsistent policy changes.Results reveal that the confidence of foreign investors is significantly damaged with severe operational constraints, most notably related to foreign exchange access, profit repatriation and general macroeconomic disorder.Local retail SMEs reported crippling operational problems regarding sourcing (of new products), pricing (commercial and sourced goods), business planning and access to finance.As a result, widespread adaptive strategies based on dollarization and informal markets are prevalent in both groups, suggesting the lack of effective local currency policy.The paper adds perception-based evidence on the sectoral effects of persistent exchange rate policy uncertainty on the Zimbabwean retail sector.It establishes a clear connection between the signalling properties of policy actions and the deficits in the quality of the institutional landscape and the empirically measured economic behaviours and confidence levels of foreign investors and local entrepreneurs, providing precious insights to policy-makers and academics studying economies in complex transitions.