Ex­change rate fears com­pound rand re­jec­tion, multi-cur­rency sys­tem suf­fers

Chronicle (Zimbabwe) - - Front Page - Harare Bureau / Chron­i­cle Re­porter

THERE is a mixed re­ac­tion on the use of mul­ti­c­ur­ren­cies as some re­tail­ers are re­fus­ing to ac­cept the South African rand as le­gal ten­der while the gen­eral pub­lic is re­ject­ing the cur­rency at the banks.

Few lo­cal su­per­mar­kets in­clud­ing N. Richards and OK shops have em­braced the rand and are also us­ing Point Of Sale (PoS) ma­chines to make trans­ac­tions eas­ier. The su­per­mar­kets have dis­played the ex­change rates for cus­tomers.

The Harare City Coun­cil is ac­cept­ing the rand but only through the bank.

HCC act­ing cor­po­rate com­mu­ni­ca­tions man­ager, Mr Michael Chideme said con­sumers could de­posit their rand or Chi­nese yuan into the bank ac­count.

“Con­sumers can use dif­fer­ent cur­ren­cies to pay for the wa­ter bills. They will de­posit the money into our bank ac­count and we will get an equiv­a­lent of that money in US dol­lar,” he said.

Some shops were, how­ever, re­fus­ing to ac­cept the rand es­pe­cially cloth­ing de­part­men­tal stores.

Most In­dian and Chi­nese shops have also not em­braced the rand while others still do not have PoS ma­chines. This means most of them are not bank­ing pro­ceeds. Many shops in Bu­l­awayo are also re­ject­ing the rand but like its branches in Harare, OK out­lets in Bu­l­awayo are ac­cept­ing the cur­rency as well as the Botswana pula.

At the tobacco auc­tion floors, some banks are of­fer­ing the rand but few farm­ers are ac­cept­ing the cur­rency as they do not have con­fi­dence in it while some said they were afraid of the con­stant change of the ex­change rate.

Other farm­ers said they were not aware of the of­fi­cial rate and were afraid they could fall prey to un­scrupu­lous busi­ness peo­ple.

On the other hand, traders in the in­for­mal sec­tor are re­fus­ing to ac­cept the rand as they are afraid of cling­ing to a cur­rency that would lose value in a short pe­riod.

Some ser­vice sta­tions were of­fer­ing a lower rate for the rand but us­ing the PoS ma­chines. Some ser­vice sta­tions were of­fer­ing as lit­tle as $5, equiv­a­lent to R100.

Zim­babwe Na­tional Cham­ber of Com­merce chief ex­ec­u­tive Mr Takunda Mu­gaga said it was dif­fi­cult to have a cur­rency com­pet­ing with the US dol­lar at the mo­ment.

“The US dol­lar is not only a credit cur­rency, but is also be­ing taken as a re­serve cur­rency. The US dol­lar strength­ens when other cur­ren­cies are go­ing down. Thus the de­mand for the US dol­lar is nor­mal,” he said.

Iron­i­cally in June, bankers and in­dus­try rec­om­mended the adop­tion of the South African rand as the ma­jor trans­act­ing cur­rency to re­duce con­cen­tra­tion of risk as­so­ci­ated with heavy reliance on the United States dol­lar cur­rently ac­count­ing for 95 per­cent of all trans­ac­tions.

This came as the Re­serve Bank of Zim­babwe moved to ex­pe­dite cash im­por­ta­tion by banks af­ter in­clud­ing cash im­ports un­der the pri­or­ity one (high) cat­e­gory of for­eign ex­change pay­ments.

Bankers said the adop­tion of the rand would be one of the mea­sures needed to ad­dress the cash chal­lenges the coun­try is fac­ing.

Mr Mu­gaga said in 2009, Zim­babwe had the rand and US dol­lar con­sti­tut­ing 49 per­cent each with the re­main­ing two per­cent con­sti­tut­ing other cur­ren­cies.

“In 2013, the rand and US dol­lar con­sti­tuted 50 per­cent each and the other cur­ren­cies had been swal­lowed. In 2014 the rand was also be­ing swal­lowed and now we have the US dol­lar as the dom­i­nant cur­rency,” he said.

Mr Mu­gaga said it was not no­ble for Gov­ern­ment to en­force the use of the rand and other cur­ren­cies in case there would be another par­al­lel mar­ket.

He said the pub­lic was also ra­tio­nal and made in­formed de­ci­sions.

Mr Mu­gaga en­cour­aged Gov­ern­ment to come up with a pol­icy of en­cour­ag­ing shops to ac­cept the rand.

“Com­pa­nies should not refuse to trans­act us­ing the rand. Paras­tatals should be in the fore­front and lead by ex­am­ple by em­brac­ing the rand. Gov­ern­ment de­part­ments and com­pa­nies should be the first to em­brace the rand ahead of the pri­vate sec­tor.

“There should be con­fi­dence in the bank­ing sec­tor,” he said.

Econ­o­mist, Mr Mid­way Bhunu yes­ter­day said the rea­son for the be­hav­iour in the mar­ket was mainly hinged on the power of the US$ against other cur­ren­cies. “How­ever, this is putting a lot of pres­sure on the US$ hence the short­ages and re­stric­tions on bank with­drawal. Although the rand is a strong cur­rency in the re­gion, it is un­sta­ble on the in­ter­na­tional mar­ket against other cur­ren­cies. Peo­ple are cal­cu­la­tive. “We are op­er­at­ing in an en­vi­ron­ment char­ac­terised by too much spec­u­la­tion as it’s not busi­ness as usual due to other fac­tors beyond the con­trol of the last man in the street,” he said. Gov­ern­ment in­tro­duced multi-cur­rency ar­range­ments in pay­ment trans­ac­tions to pro­mote fi­nan­cial sec­tor sta­bil­ity. The move was part of a plethora of mea­sures in­tro­duced by Gov­ern­ment through the Re­serve Bank of Zim­babwe aimed at en­sur­ing safety and sound­ness of the bank­ing sys­tem and to al­le­vi­ate the per­sis­tent liq­uid­ity chal­lenges in the econ­omy.

Ar­range­ments in­cluded in­tro­duc­tion of a mul­ti­c­ur­rency tier price struc­ture that in­cludes the South African rand and other cur­ren­cies within the mul­ti­c­ur­rency sys­tem, along­side the US dol­lar and bond notes when in­tro­duced. The bond notes are ex­pected also to ease the cur­rent liq­uid­ity chal­lenges and cash short­ages.

Baron Dube (left) and Mthulisi Ng­wenya

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