HARARE – Zimbabwe’s central bank is warming up to adoption of the South African Rand as a dominating currency following various calls from business in favour of the exchange.
In an apparent U-turn from his previous stance, Reserve Bank of Zimbabwe (RBZ) deputy governor Kupukile Mlambo, on Thursday said rand domination would benefit the country, presently battling an acute cash crisis and help alleviate cash shortages.
Mlambo pointed out that the central bank would prefer for the South African currency — which firmed 0,6 percent against the dollar on Wednesday just off the 20-month high reached earlier this week — to be Zimbabwe’s dominant currency, following hints by President Robert Mugabe in a recent interview that the country needed to adopt the rand.
“We will be happy in the central bank if people use the rand more than they would use the other currencies in the basket. But because people only store value, they prefer to use the dollar — that’s where the challenge is,” Mlambo told delegates at a Confederation of Zimbabwe Retailers bond note review meeting in the capital.
Mlambo — who has voiced his doubts over rand adoption in the past, together with his boss, RBZ governor John Mangudya — told business leaders that the South African currency was “prudent” for the country at the moment.
“We can benchmark pricing with the rand, which we can’t do with the dollar, because we trade almost nothing with the US,” the deputy governor said.
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 outside the country have re-located to the neighbouring country and remitted an estimated $450 million in the first nine months of 2016 alone.
Following adoption of the multi-currency system back in 2009 — after the local currency hit the skids in 2008, leaving the country vulnerable to hyperinflation that peaked 231 million percent, US Dollar (US$) dominated Zimbabwe which witnessed an escalation of cash shortages.
Various business quarters have been lobbying government to formally adopt South Africa’s currency as the country’s formal trading exchange; however, the central bank and Treasury have been against the stance.
In October last year, Mlambo — who admitted that the US$ was not an ideal currency on account of the numerous “headaches” that came with it — ruled out rand adoption saying Zimbabwe needed to first join the sub-regional Common Rand Monetary Union also pointing out volatility of the currency.
But in his 93rd birthday interview, Mugabe said the country should adopt the rand to mitigate severe liquidity and cash challenges.
“ . . . Well, I don’t know why the ministry of Finance, together with the Reserve Bank, have not wanted to use other currencies. I have asked actually again and again kuti (that) why not have euros, why not have yen, why not have rand alongside with the dollar?
“Ah tichazviita, tichazviita (Ah, we will do it, we will do it). At least if we had the euro, I don’t think we have sanctions on the euro . . .,” Mugabe said in the televised interview.