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AMHVoices: SA won’t sign death warrant for its currency

AMH Voices
IT is amazing that captains of industry and the banking sector are putting the South African rand up as a replacement for the US dollar as the main trading currency both internally and externally.

IT is amazing that captains of industry and the banking sector are putting the South African rand up as a replacement for the US dollar as the main trading currency both internally and externally.

By A Mbire,Our Reader

South African rands
South African rands

There may be a bit of sense as our main trading partner is South Africa, but it is not our only market.

The world mostly trades in US$ and everyone knows its value. The rand is an unstable currency mostly losing value weekly. If we convert to the rand, we will be accepting a continual reduction of the value of our money, which will most likely be accelerated by the unstable political situation in South Africa.

We have gotten ourselves in a fix by our banks buying useless pieces of paper called Treasury bills from a government that has no ability, and probably never had the intention, of buying them back in real currency.

Thus, banks have converted our foreign-denominated currency accounts into worthless ethereal numbers. However, unlike the days of the hyperinflationary Zimbabwe dollar, the banks are now vulnerable to depositors suing for payment of those ethereal numbers in real money which are not backed by any concrete value assets.

One bank has already tried to change its conditions of contract with its customers to allow for payment of their dollars in “other forms of assets … which may not be redeemable”, ie, Treasury bills or bond notes.

This is a sensible move for a bank that has suddenly woken up to the fact that they used their customers’ real money to buy valueless Treasury bills, but still owe real US$ and have no assets to back up those dollars, just like the government.

Given that the banks now own nothing and the Reserve Bank of Zimbabwe has in all inevitability squandered the bulk of our real money, we want to ask the South African Reserve Bank to allow us to convert these useless assets into rands.

How is this going to work? We need cash notes to trade internally and money in the nostro account to trade externally.

So to get the notes, we need to ask the South Africans to print a whole bundle of extra rands that will have no tangible assets to back them up as we will need them to accept the valueless Treasury bills for those rands.

This will devalue the rand substantially, which the South Africans are unlikely to want to see.

Then they will have to give us a whole bundle of rands into our nostro account for us to buy our imports, ie, take over our debts and provide us with bridging finance.

They by now should know that any forex we can lay our hands on will be directed towards gratifying the greed of our politicians and not for the betterment of our economy.

So, in short, the South African economy will be financing the continued looting by our politically well-connected to the tune of at least $1 billion a year.

This will collapse the South African economy.

Presumably, we are proposing that at the stroke of a pen (computer keyboard) to convert depositors’ US dollar accounts into rand.

These accounts will suddenly have real value again as we will be telling the South Africans that they owe our depositors rands, and presumably we can all get those rands out of the banks or go to South Africa and sue for our rands.

Would the South Africans be so naive as to allow for that?

For the South Africans to allow us to use the rand as the main prop of our economy, reckless expenditure and corruption, would be signing the death warrant of their economy. This is highly unlikely to be an attractive option for the custodians of the rand!