As the leader of our northern neighbour disappears down the rough and winding potholed road he’s misdirected his country down, his cabinet and bankers are debating introducing the rand as the main currency instead of the controversial new dollar-linked bond note. Both are hastily described as ‘temporary measures’ – much akin to the acting CEO’s of State Owned Enterprises that South Africa is fast becoming famous for in its own insane emulation of Zimbabwe on so many fronts. Rand-benchmarking protagonists say the bond notes won’t last and point out that 60% of all Zimbabwe’s trade is already with South Africa – and virtually none with the USA. The bond is currently just one note in a basket of other currencies concurrently doing the rounds. When it was first brought in, the central bank said the amount of the paper currency that individual Zimbabweans would have in their possession should never exceed 19 US dollars and so there would be no opportunity for the black market to resurface. That hasn’t happened: if you’re lucky enough to get cashback at a major retailer, your 40 US will likely comprise 30 US worth of bond notes. In further evidence of things getting tighter, Standard Bank Zimbabwe has just informed its clients they can’t use their Visa cards when they travel outside the country. Will South Africa wake up before we ‘earn’ junk status and set off down a similar road? One consolation; at least we won’t have to wait until our president dies for some kind of change to happen… – Chris Bateman
by John Viljoen and Godfrey Marawanyika
(Bloomberg) – A central bank official said it would be “prudent” for Zimbabwe to use the rand rather than the U.S. dollar as the dominant currency as the southern African country seeks ways to ease a shortage of foreign exchange.
“We can benchmark pricing with the rand, which we can’t do with the dollar, because we trade almost nothing with the U.S.,” Kupukile Mlambo, deputy governor of the Reserve Bank of Zimbabwe, told a gathering of business leaders Wednesday in the capital, Harare.
Zimbabwe abandoned its own dollar in April 2009 as runaway inflation rendered it worthless, using instead a mix of foreign currencies that now includes U.S. dollars, pounds, euros, rands, yuan and Botswanan pula. In an effort to address a shortage of banknotes, the government in November started printing and distributing dollar-denominated notes backed by reserves in the U.S. currency, prompting protests from locals skeptical about the new currency’s value.
Zimbabwe conducts 60 percent of all its trade with South Africa, according to the country’s Treasury, and three million of its citizens are estimated to live in its southern neighbor after fleeing economic hardship at home. The rand has strengthened about 9 percent against the dollar this year, more than any other African or emerging-market currency tracked by Bloomberg. Zimbabwe’s largest business lobby group in November called on the government to adopt the rand as its “reference currency” instead of the dollar.
“We will be happy in the central bank if people use the rand more than they would use the other currencies in the basket,” Mlambo said. “But because people only store value, they prefer to use the dollar — that’s where the challenge is.”