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NewsDay

AMH is an independent media house free from political ties or outside influence. We have four newspapers: The Zimbabwe Independent, a business weekly published every Friday, The Standard, a weekly published every Sunday, and Southern and NewsDay, our daily newspapers. Each has an online edition.

Weakening of SA rand wake up call

Opinion & Analysis
The volatility of the South African rand against major currencies in recent weeks has underscored the need for the government to act quickly and decisively on which currency to formally adopt.

The volatility of the South African rand against major currencies in recent weeks has underscored the need for the government to act quickly and decisively on which currency to formally adopt.

While the multi-currency regime has served us well for the past six years, it is now imperative that the government settles on a single currency to use to avoid foreign currency exchange rate distortions.

We have to reiterate at this point that we are not advocating for the return of the Zimbabwe dollar, not yet at least, but rather clarity on what official currency the country uses.

On a small scale, $1 can get between R10 and R13,50, and such lack of clarity and disparity in exchange rate is not helpful.

There is confusion in other sectors of the economy, as other companies say they do not accept payment in rand, while others set ridiculous exchange rates.

It does not take an economics professor to realise that such a lack of clarity is bad for an economy already reeling under the effects of the adoption of foreign currencies.

Rand

South Africa is by far our largest trading partner and adopting the rand as the major currency is a no brainer, as it would make trade with South Africa cheaper and easier.

As it is, the fall of the rand against the US dollar means our exports have become expensive and unattractive to South Africa, while their imports have become cheaper.

What this means is we are literally exporting jobs to South Africa and our continuous and stubborn clinging onto the US dollar as the major currency is unhelpful if not suicidal at this stage.

There have been suggestions that Zimbabwe looks to joining the South African Common Monetary Area (CMA), as this will give Zimbabwe flexibility in setting interest rates and determining monetary policy.

However, there is lack of truth in what happened to these suggestions. Vice-President Emmerson Mnangagwa suggested South Africa came up with stringent rules for Zimbabwe to join, leading to our failure in joining the CMA.

On the other hand, there are claims that chauvinistic patriotism led to us rejecting the CMA, as we felt Zimbabwe would be subservient to South Africa.

Our advice is that government should re-look and seriously consider engaging South Africa on the CMA.

Lesotho, Swaziland and Namibia are leveraging their economies on the rand, while Botswana is also benefitting from pegging the pula to the South African currency and Zimbabwe has nothing to lose from doing the same.

Zimbabwe’s obstinacy on currency reform is unhelpful and detrimental to the economy.

Whatever reforms South Africa demanded of Zimbabwe before joining the CMA should be implemented, as this is in our best interests.

Media reports have hinted that the US may raise interest rates and this in essence means the US dollar will become more expensive and very much to the impairment of small countries like Zimbabwe. While Zimbabwe’s efforts are focussed on re-engagement, we believe currency reform is also an integral part of efforts at resuscitating the economy and must be looked at seriously.