Million-bollar question: can the rand save Zim?
Quiet scramble for South African currency as Mugabe’s grip on power weakens
FOR six months leading up to their issue, Zimbabwe’s “bond notes” — which were finally released on Monday by the central bank — were mocked for being “bond paper” and “bollars”, the latter ridiculing their decreed 1:1 value to the US dollar.
Protests in Harare and court challenges flared in the run-up to the bond notes launch, as citizens resisted what is widely seen as a backdoor reintroduction of the defunct Zimbabwe dollar last used in 2009.
Still, President Robert Mugabe’s government went ahead. Despite the fear and loathing over the new notes, authorities have called on citizens to “embrace the bond notes” — the cornerstone message of the central bank’s nationwide publicity blitz.
Zimbabwe faces its most severe cash shortage yet: banks have run out of US dollars, depositors face strict daily withdrawal limits of $50 (about R700) and the state is struggling each month to pay civil servants.
There is also an eerie silence over the payment of bonuses for state employees — these are normally paid at the end of November.
The issue of bonuses is expected to get a mention from Patrick Chinamasa, the finance minister, when he presents the national budget on Thursday.
Critics, however, argue that the ongoing economic meltdown has set the stage for an end to Mugabe’s grip on power.
The country is set to hold elections in 2018.
Mugabe, who will be 94 then, has already indicated his intention to stand for re-election.
Ibbo Mandaza, a political scientist and director of the SAPES Trust, a think-tank in Harare, said the country was witnessing the making of an endgame.
“We are in the endgame for Mugabe and it came a long time ago,” Mandaza said this week.
Next week in Masvingo, Mugabe’s ruling Zanu-PF heads to a party congress deeply divided. It has also lost the unwavering support of war veterans, who in July accused Mugabe, their patron, of “poor leadership” and running a “broken economy”.
Different factions in Zanu-PF smell blood and are seeking to outmanoeuvre each other for the country’s top job.
Yet, as Zimbabwe battles its economic and cash-crisis woes, underpinned by the issue of the bond notes this week, political and economic observers tip an unlikely beneficiary — the rand.
The use of the rand in Zimbabwe is widely expected to increase, as the severe US dollar shortage shows no signs of ending and uncertainty persists over the impact of the bond notes.
“It’s likely that more people will look for the rand than the bond note, as they have trust in it, [rather] than the latter. In the long run, [the rand] will become scarce as well,” said John Robertson, head of Robertson Economics in Harare.
Zimbabweans have had a lovehate relationship with the rand since it was adopted in a multibasket of currencies in February 2009. SOUR NOTE: A street vendor with bond notes in Zimbabwe’s capital, Harare. Authorities have urged citizens to embrace the controversial currency
Circulation of the rand is now almost negligible and rand coins stopped being accepted as legal tender in the country last year.
The rand accounts for a mere 5% of all transactions, according to the Reserve Bank of Zimbabwe, in contrast to the 95% dominance of the US dollar.
A few years ago, this was not the case as the rand was used in 50% of all transactions.
A bank executive at CABS, a unit of Old Mutual and the country’s largest mortgage lender, said this week that a scramble for the rand had been quietly taking place as the cash crisis persisted.
“We are now moving about R10-million each month. At one time we were doing just under R1-million,” he said on condition of anonymity.
Mandaza said the rand was a part of Zimbabwe’s economy — despite the resistance to accord it official recognition by authorities.
Harare has been shy to adopt the rand as the main unit of trade, wary of losing its “sovereignty”.
RBZ governor John Mangudya said last month that a move to the rand was “dangerous”.
Mandaza said the rand had been used for a long time and, in some parts of Bulawayo, the second-largest city, it had been the preferred currency against the US dollar.
“The problem is it fell in value against the US dollar and lost about 50% of its value.
Mugabe, who will be 94 then, has already indicated his intention to stand for re-election
BONDAGE: Protests flared this week against the introduction of bond notes
“But the rand is still a major factor in the economy, like it or not,” he said.
Mandaza said part of the move away from the rand had been caused by South African companies that had taken advantage of the US dollar’s strength to peg their invoices in US dollars, instead of rands.
“Eskom, for example, is said to be owed $18-million by Zimbabwe. Why is this debt in US dollars, and not pegged in rands? It is because Eskom has insisted on being paid in US dollars.
“It’s a fact that South African companies have been capitalising on the US dollar in Zimbabwe and much of the repatriation of the country’s US dollars has been to South Africa,” he said. ‘ENDGAME’: Zimbabwe President Robert Mugabe has been accused by war vets of running a ‘broken economy’
South African firms with operations in Zimbabwe include retailer Pick n Pay; Stanbic, a unit of Standard Bank; MBCA, a unit of Nedbank; national airline SAA and mining giant Zimplats, a unit of Impala Platinum.
Shingi Munyeza, chairman of Vinal Investments, which runs the Mugg & Bean and News Cafe franchises in Harare, said given that at least 70% of the consumer basket was imports from South Africa, a move to the rand was more natural than the bond notes.
“The government bringing the bond notes is both economic and political, with the political reasons outweighing the economic reasons.
“If they were more for economic reasons, then the rand would have been a better option to incentivise the exporters, who are mainly exporting through South Africa and who also require imports mainly from South Africa,” he said.
Robertson pointed out that the rand alone was not the answer to the country’s problems; the resumption of productivity was also necessary.
“The debate on whether Zimbabwe should have adopted the rand as its main unit is rather misplaced.
“We have to earn the money through exports, but so far none of the government’s plans are trying to restore agriculture and manufacturing, which are the pivots of our export sector,” Robertson added.