Time to rethink the rand debate

HARARE - The adoption of the multiple currency system in 2009 — dominated by the United States dollar — brought relief and stability to the crisis-weary Zimbabweans, but the strengthening of the greenback against regional currencies is now haunting the economy.

Over the past six years, the dollar’s appreciation has made imports cheaper, exports more expensive and fuelled a cash crunch, resulting in local companies losing their export competitiveness.

To save what’s left of our industry, we suggest that the country either adopts an internal devaluation of the dollar or to adopt the South African rand as our preferred currency. However, we favour the latter option as it has more advantages for the economy.

Official figures show that Zimbabwe imported goods worth $2,5 billion from neighbouring South Africa last year, more than from all its other trading partners combined.

In addition, the two countries’ economies are further entwined by the estimated two million Zimbabweans who migrate to find jobs in Africa’s most industrialised economy, according to United Nations estimates.

By using the rand or joining the Rand Union, Zimbabwe stands a better chance of economic revival through the removal of restrictions on the transfer of funds, whether for current or capital purposes among the member states.

This entails that there is no restriction on cross-border investments from South Africa, thus contributing to economic growth and economic integration.

It will be easier for local investors and deficit units to enter into South Africa’s rich capital and money markets to increase their capital bases.

This will also make it easier for local firms to court partnerships with listed firms on the Johannesburg Stock Exchange, resulting in capital inflows. 

The existing Rand Union regulations provide that a member can issue out its own currency pegged at par with the South African rand, as is the case with the current signatories. Since South Africa is one of Zimbabwe’s major trading partners, joining the union will mean fixed and predictable exchange rates.

This will assist in giving economic agents a platform to plan over a long planning horizon without uncertainty due to exchange rate volatility.

As is currently the situation with the member countries in the Rand Union such as Swaziland, Lesotho and Namibia, Zimbabwe will be presented with a platform to resuscitate the operations of the country’s central bank, being responsible for the country’s monetary policy.

As part of the Union, Zimbabwe would also contribute in determining the fundamentals affecting its industry and commerce. The contracting parties share a common pool of foreign exchange reserves, under the control of the South African Reserve Bank.

Comments (6)

The rand is driven by it's own country economic drivers unrelated to the region therefore union is suicidal. Zim will be better off in the long if they hold on to the dollar and the time is now to import machinery from South Africa and revive industry, create employment. A strong currency is advantageous than a volatile one

Dee - 12 November 2015

I do agree with the idea of adopting the rand as the preferred local currency considering that as Zimbabweans we have so many interests in South Africa. Most of the cash inflows from the diaspora is coming from South Africa where an estimated three million people have migrated in search of employment. The falling of the rand against the dollar is discouraging those earning the rand in SA to send money home as it is better off using the money from SA. For example someone earning R5ooo when converted will result with around $300 to use shared with family members at home. Prices in the shops, school fees have remained pegged in the $ . It has become difficult to the extend that people are starting to consider other options like may be take their children with them so that they wont be sending money home. That means the much needed inflows from the diaspora are affected. For an economy which is ailing like ours the only option left is to adopt the rand and suspend the dollar in the local market. The system is working well in Namibia, Lesotho and Swaziland. So deffinately it will not fail us.

Fungayi Tiyenga - 13 November 2015

Very wise economic suggestions from the article. Our economy is so intertwined to the RSA to the extent that the so-called "crush" of the rand on our mickey mouse economy is at worst suicidal to us and our large diaspora community that has been fueling life to what is left of a withered economy apart from sustaining large families back home. The conditions for joining the rand zone makes very good regional economic sense. A one currency SADC can only result in a mega-economy for the benefit of all in Southern Africa.

tafamutekwe - 13 November 2015

Those that think we must join the rand union are driven by some undisclosed nostalgic sentiments in need of satisfying rather than economic facts and sense. The South African economy is fraught with a plethora of socio-economic risks that will also engulf us if we use the rand. We do not think we want to suffer together with South Africans. The USA economy is rather stable and has less risks since it has able and more intelligible managers compared to south African economy. You have never heard of power shortages in USA. Infact, the US$ is an international currency that that planet all and sundry on planet earth wish to posses. The economic woos Zim suffers is due to economic mismanagement rather than the strength of a dollar. The exchange rate is the only fair diagnostic apparatus that can shows the health status of an economy without favour. Hence, to hell with the rand.

Danai Pazvagozha - 13 November 2015

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profashaf - 14 November 2015

Even if we adopt the Rand, it will not change our situation . We need to do the following: 1. Respect Property Rights 2. Introduce rule of law. 3.Have a relook at the indigenous law. Can we possibly empower people by levying taxes on gross revenue and let the Investors keep 100% of their companies. Remember its only recently that the US$ has strengthened.

Paul - 14 November 2015

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