THE South African Reserve Bank has not received any official communication from Zimbabwean authorities for the adoption of the South African rand as the main unit of trade, Jabulani Sikhakhane, the divisional head of communications at the Bank, has said.
A severe US dollar shortage in Zimbabwe has persisted for more than a year and has forced banks to impose daily withdrawal limits of about $50. The use of international bank cards outside the country has also been suspended by some banks, such as Standard Chartered.
“Bond notes”, which authorities introduced in November last year as a stop-gap measure to plug in cash shortages, are also now in short supply.
Banks have become increasingly reliant on issuing bond notes to depositors. Banking industry players say the bond notes have found their way into neighbouring countries SA, Botswana and Mozambique, where there is a large presence of cross-border traders.
Barclays Bank Zimbabwe managing director George Guvamatanga told delegates at a financial markets conference in Johannesburg in May that ‘there could be more bond notes in Park Station in SA, Botswana, Zambia and Mozambique than we have here in Zimbabwe.’
Captains of industry and commerce in Zimbabwe have also been piling pressure on the government to use the rand, rather than the US dollar, a move they argue is sensible given the close trade ties between the two countries.
Denford Mutashu, president of the Confederation of Zimbabwe Retailers, said the rand’s adoption by industry was premised on the two critical challenges it faced: ‘To improve the ease of doing business, and the shortage of foreign currency that is hampering payment of raw materials from external suppliers.’
South Africa accounts for nearly 70 percent of Zimbabwe’s imports and a large group of South African companies have operations in Zimbabwe, including South African Airways, Pick n Pay, Sanlam and Old Mutual.
The Reserve Bank remains open to the adoption of the rand by its northern neighbour. Sikhakhane said Zimbabwe could formally adopt the rand by joining the Common Monetary Area, which comprises SA, Lesotho, Namibia and Swaziland. ‘In this case, Zimbabwe would be required to sign the Multi-lateral Monetary Agreement (MMA) that stipulates the conditions that would have to be fulfilled by Common Monetary Area countries,’ he told the Johannesburg Business Day newspaper.
Some of the contractual conditions include holding regular consultations to facilitate and ensure continued compliance with the MMA, and reconciling different interests in the formulation and implementation of monetary and foreign exchange policies for the Common Monetary Area. There would also be no restrictions on the transfer of funds, whether for current or capital purposes, between the areas of the contracting parties.
The rand already serves as legal tender and is widely used and accepted in the participating countries. Under the terms of the MMA, the other member states are entitled to issue their own national currency.
An advantage, Sikhakhane pointed out, is that Zimbabwe already has the rand in circulation. ‘This can continue, and as banknotes in circulation become worn out in Zimbabwe, they can, as other neighbouring countries do, send the worn out banknotes to SA for replacement.’
However, Davison Norupiri, president of the Zimbabwe National Chamber of Commerce, said there would be limited impact by the formal adoption of the rand by Zimbabwe. ‘Our problem is not on the currency we use, but on sorting [out] the fundamental economic issues, such as increasing our exports, attracting foreign direct investment and getting lines of credit from the International Monetary Fund,’ he said. ‘As the [Chamber] we are not for [rand adoption]. The rand is not our local currency and, in any case, we can’t get it for free … we need US dollars to buy the rand.’