Cash-strapped Zimbabwe turns to rand

THE shortage of US dollars in Zimbabwe has turned out to be good for the rand, which, until now, has been shunned in most transactions.

This week, calls for the increased use of the rand were amplified by Zimbabwe’s industrialists, bankers and the private sector, as the country struggles to satisfy the high demand for dollars.

Bankers Association of Zimbabwe president Charity Jinya, who is also MD of MBCA Bank, a subsidiary of South Africa’s Nedbank, said on Monday that the rand had to be urgently taken up.

“It is not sustainable for the US dollar to continue as the major transacting currency, so we recommend that the South African rand be used as the main transacting currency. This would reduce concentration of risk on the US dollar,” said Jinya.

“We also recommend that the US dollar be reserved to make offshore payments and local electronic payments. That will reduce the amount of US dollars likely to leave Zimbabwe through unofficial means.”

President Robert Mugabe’s government is widely seen by economists to be wary of the wholesale adoption of the rand as it has repercussions for “political sovereignty” and economic independence. The Reserve Bank of Zimbabwe, as a precondition to the wholesale adoption of the rand, would have to agree to the monetary policy laid out by the South African Reserve Bank.

The rand lost its lustre late last year in Zimbabwe after it plummeted to its lowest levels against the dollar since 2001. Rand coins were rejected by retailers and transport operators in preference for bond coins, introduced in December 2014 by the central bank.

At present, the greenback accounts for 95% of all transactions in Zimbabwe — from 49% in 2009. In February 2009, Zimbabwe ditched the Zimbabwe dollar for a multicurrency system using the dollar, rand, pound, pula and euro.

Those who back the adoption of the rand as the main currency of transaction say strong trade ties between South Africa and Zimbabwe support the move. Trade between the two countries stood at $4.2-billion (R14.81-billion) in 2015, according to the Zimbabwe National Statistics Agency. South Africa accounted for 48% of Zimbabwe’s overall trade earnings.

South Africa is the secondlargest buyer of the country’s tobacco crop which is on auction. Tobacco sales to South Africa have increased by more than 50% to 8.1 million kilograms worth $24.86-million, up from 4.9 million kilograms worth $14.43-million last year. Sales so far of nearly $250-million this season have helped ease the liquidity crunch.

John Mangudya, the governor of the Reserve Bank of Zimbabwe, has given the nod to the country’s banks to dispense the rand to depositors instead of the dollar.

“The banks have the rand to give to their clients, but the public prefers US dollars. We pray that the banking public understand that we are under a multicurrency system and should use other currencies, including the rand,” he said.

The preference for the US dollar in transactions has been costly for the country’s tourism sector, a top GDP earner. A strong dollar has scared off tourist arrivals from South Africa.

“Right now people can’t access their cash. If people cannot access money, then it affects tourism in that they cannot even use the money to go for holidays. Foreign tourists are not accessing their money and they can’t use their cards,” said Paul Matamisa, CEO of the Zimbabwe Council for Tourism.

In an advisory this week, the UK government warned citizens travelling to Zimbabwe that they will have difficulty accessing their funds.

“Almost all transactions are conducted in US dollars. Zimbabwe is experiencing a shortage of cash. It is not currently possible to make cash withdrawals using an international bank card,” read the advisory.

Bond notes — backed by a $200-million facility from African Export-Import Bank — which the Reserve Bank of Zimbabwe was set to introduce initially in August have been postponed to October.

The IMF said it was “assessing the implications” of the new measures to ease the liquidity crunch. The country’s largest opposition party, the Movement for Democratic Change, led by Morgan Tsvangirai, said the cash crisis had put the country on a “knife edge”.

Tourists are not accessing their money and they can’t use their cards