By Blessings Mashaya
Morgan Tsvangirai’s MDC has said it backs the adoption of the South African rand as the primary currency.
In an interview with the Daily News yesterday, MDC shadow finance minister Tapiwa Mashakada said since 50 percent to 60 percent of Zimbabwe’s total trade is with South Africa, the most advantageous foreign currency to adopt is the rand.
“Joining the South African Rand Union would ameliorate Zimbabwe’s cash crisis but who would want to be exposed to the Zimbabwean contagion?
“Zimbabwe’s largest trading partner is South Africa and it would make a good business case to adopt the Rand but the mechanisms are not that easy. For starters, one of the preconditions is that Zimbabwe must have its own domestic currency.”
Zimbabwe abandoned its own currency in 2009 after hyperinflation rendered the Zimdollar worthless.
“And at this juncture, conditions are not yet ripe for the re-introduction of our own currency,” Mashakada said.
“The country has to ratchet up its production and exports in order to close the trade balance. The country has to rebuild its own foreign currency reserves in order to back up our own currency. Until all these fundamentals are achieved, it’s not possible either to adopt the rand or reintroduce our domestic currency,” the former Economic Planning minister said.
Recently, former Finance minister Tendai Biti said the ship had sailed for Zimbabwe to adopt the rand as an anchor currency.
Writing on his Twitter account, Biti said without Zanu PF reformation, the rand would not save Zimbabwe’s deteriorating economy.
“Too late to adopt Rand. Economy now in so much disequilibrium without reforms Zanu PF will bastardise the Rand as they have the Zimdollar and the US$. FDI is not flowing into Zim because of toxic and predatory Zanu politics. Remove Zanu & billions will pour into this economy.
“Let’s rebuild productive base and build reserves of at least of $9 billion. We maintain regime of multi currencies for now,” Biti said.
RBZ deputy governor Kuphukile Mlambo has said the central bank was considering a basket of currency reforms, the centrepiece of which is rand adoption, to try to shore up liquidity after the offer to Zimbabwean producers for a 5 percent bonus on the value of what they export in US dollars have failed to address the cash crisis.
This incentive is funded by the new bond notes introduced last November, which in turn are backed by a $200 million facility provided by Cairo-based Afreximbank.
Presently, South Africa remains Zimbabwe’s biggest trading partner. In the first two months of the year, Zimbabwe registered a trade surplus of $14 million against South Africa with imports worth $171 million making their way into the country compared to exports of $185 million.
Over three million of the 13 million Zimbabweans are in neighbouring SA and remitted an estimated $450 million in the first nine months of 2016 alone. An adequate supply of rand is available from Zimbabwe exports to South Africa, Diaspora remittances from South Africa, and access to the South African banking system with which many of Zimbabwean banks and financial institutions such as MBCA are already connected.
Various business quarters have been lobbying government to formally adopt South Africa’s currency as the country’s formal trading exchange. Daily News