‘Zim should adopt rand to boost exports’

South African rand

Zimbabwe has to urgently adopt the South African rand as a currency to boost exports amid growing United States dollar shortages in the economy, a senior economist has said.

BY TATIRA ZWINOIRA

South African rand
South African rand

Scholar and senior economist Ashok Chakravarti told NewsDay in an interview on Tuesday that the current levels of real cash in circulation against deposits were alarmingly low at about $300 million, necessitating the introduction of the rand to ease cash pressures.

“A weaker currency is a benefit to trading and particularly for a small country for us to become competitive we cannot have a strong currency. We need a weak currency. You cannot have a dollarised economy in a non-dollarised world. Even if you build a wall around Zimbabwe, it (the US dollar) will always go out somehow as we will continue to be the source of US dollars for the rest of the region,” Chakravarti said.

“The option of the national currency was ruled out due to a return of hyper-inflation and it has been agreed that bond notes not not the solution to the problem. Now, in economics we have something called optimum currency theory which is very well-known and that is the basis on which the European Union was formed. So it says if you have countries that are very close to each other in trading them then you can have a common currency between.”

Zimbabwe enjoys between 50 and 60% of trading with South Africa.

Zimbabwe adopted a basket of currencies in 2009 to stem hyper-inflation. The currency basket has nine units dominated by the dollar.

South African ambassador to Zimbabwe Mphakama Mbete said it would be acceptable if the adoption of the rand helps stabilise trade between South Africa and Zimbabwe.

“I am not a financial expert, but being an important neighbour we would come to any agreement or discussion where there would be a win-win situation where both countries would benefit. So any arrangement around our currency where we would both win is fine for us. This is not relationship of exploitation,” he said.

Dollarised countries such as Ecuador and Panama are able to remain competitive in terms of trade due to them having access to the American financial system unlike Zimbabwe, which is under sanctions.

12 Comments

  1. ko hatina here vafana vakachangamuka vakati dzidzei kudarika madhara mbavha aya who can take over oconomics dzedu. i am sure if we had those good young people the Rand would have been adopted a long time ago coz they wouldnt love to see their moms and grannies suffering at bank ques. Asi thieves idzi manje pakaipa, coz they love to see us suffer and suffer more. Sure sure you can not say kushandisa bond notes kurinani pane kushandisa Rand. hezvo bond note renyu riya ratakaramba is now being rated by informal gwejas. hanzi hee kushandisa rand kune managative results ko bond ndiro risina here. Rand is far much better toda mari chaiyo kwete miriwo yamunotiprintira iyi.

  2. Zim dollar, bearer cheques, USD, Bond notes, not Rand, sooner or later realise the problem is not the currency

    1. Thank you baba, izvi hazvidi kana economist izvi ZANU PF is the problem. These so called cash shortages are a result of the government taking out real money and not able to pay back.

    2. Chokwadi, the challenges we face are not a currency issue but structural, period!!!

  3. The problem is policies, as long as this government thinks they can go it alone, the result is crushing. they are kiling production with taxes, now when kill the cow, where do you get milk. Zimbabwe has too much taxes

  4. Ngariuye rand racho weather u like it or not

  5. Zanu PF is the culprit we all know but for the time being ladies & gentlemen let’s adopt the Rand this bond thing is leading us to 2008.

  6. Scholar and senior economist Ashok, one of the major requirements to join the Rand Currency – Swaziand Lesotho Nambia and RSA is that a member must have its own currency that disqualifies Zim. There is a myriad of requirements on financial & economic prudence, rule of law, property rights etc which our current government is allergic to and thus disqulify itself from the Rand Currency.

    Senior economist there are other SADC states which have USDollars in circulation Angola ($500million) comes to mind and have no US cash flight problem, Zim is not unique whats unique is the level of thievary. Bond notes were introduced to take away all the US Dollars from citizenry and lump it with big shefs. Nobody came from Europe/America and took all the US cash that was in circulation – perhaps from China which is in bed with the looters.

    1. You sound better informed than everyone else who commented here. I had a quick glance at the requirements for joining the Rand Monetary Union now known as the Common Monetary Area (CMA) and you’re spot on. Having your own currency, sound economic policies, and rule of law is key. The countries that are currently parties to this agreement at some point used the South African Pound, so there has been some kind of moral obligation for South Africa to support them. For any new member to join which was not part of these original members it will be new territory for the CMA, which at the moment does not even carry such a provision in its constitution. It will be legal nightmare.The process of joining is very complicated and requires numerous multilateral and bilateral agreements to be put in place. This can still be done through however. My guess is, with where we are today, it will take us a minimum of 5 years, but more likely 10 years to put our house in order and successfully negotiate all the agreements that need to be in place. It’s more or less the same with a country trying to join the EU. That process takes many years. You have to first prove you meet all their conditions such as economic stability, free market economy, stable democracy, rule of law, and acceptance of all EU legislation before being considered. I hope that helps someone here.

      However, what we can do, which is what I suspect the economist is suggesting, is to declare the Rand or any other currency for that matter, to be the functional currency in our country and we convert all bank balances overnight to Rand and start recording all transactions for accounting purposes in Rand. It’s the same with what we did with the US$. It was just an overnight declaration. The problem is that this will not make the Rand available in our banks overnight so that people can withdraw. Our banks will still need real US$ to buy the Rand on the FX market to be able to give depositors on demand. This will not work because we don’t have the dollars to buy the Rand in the first place. So, even if I have $1,000 in my bank account today and tomorrow its converted to R13,000, the bank will still not have the R13,000 to give me.

  7. the situation is trick because we import almost everything from south africa. the Rand will find its way back to SA and the problem will remain the same

  8. POLITICAL PROPHETS

    Is this a question of the rand or US dollar , or a case of political and financial mismanagement. This is a case of who wields power, and the weight of public opinion that takes precedence. The majority in this country can bring the much awaited transformation. If the minority held equal power we could have done it way back. so whether the rand is adopted or not, the majority must smell the coffee and do the right thing. Umthwakazi ubukele …..

  9. The answer does not lie in adopting another country’s currency. We should fix our problems seriously without resorting to superficial solutions. Those calling for adoption of the rand are largely people who survive by dealing in imported stuff. Namibia partly uses the rand because it was virtually colonised by South Africa after the defeat of Germany in the WW1. Swaziland and Lesotho are dormitory territories with a long history of supplying cheap labour to SA. They have no capacity to stand on their own. Using the rand has not made them better than us in any way at all, economically .

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