Zimbabwe banks reject rand adoption

Zimbabwean banks say adopting the South African rand will not help solve the country's economic challenges.

Addressing delegates at the two-day Financial Markets Indaba in Harare last week, Barclays Bank Zimbabwe managing director George Guvamatanga said more has to be done to solve the current liquidity crunch.

"Adopting the rand is not the solution. The question we must all answer is do we want to be subjected to the South African monetary authorities," he said.

Guvamatanga further indicated that Zimbabwe did not have a currency problem but production capacity.

"If the fundamental issues of productivity are not addressed we will continue having cash shortages.  One of our biggest problems is resource allocation.

"Last year we had $5,4 billion in capital inflows, where did all that money go? Since 2009, we have spent over $3,9 billion importing vehicles from Japan," he said.

Zimbabwe abandoned its own hyperinflation-hit currency in 2009 in favour of the United States dollar, but a widening trade deficit, lack of foreign investment and a decline in remittances by Zimbabweans abroad have helped to fuel foreign currency shortages.

This has prompted some quarters of the economy to call for the adoption of the rand to help ease the current cash shortages.

Last week, the Confederation of Zimbabwe Industries (CZI) said the government should evoke the law in order to enforce the economy-wide use of the South African rand and end cash shortages.

"This will transform the cost structures of both government and the private sector into soft currency from the current hard currency scenario, setting the stage for recovery in competitiveness.

"It will also result in the vast majority of transactions in the market taking place in rands, significantly reducing externalisation risk," CZI president Busisa Moyo said.

The CZI boss further noted that if automated teller machines can dispense rand notes this will provide a strong incentive to consumers to take the rand for transaction purposes.

"This step is recommended because of the current lack of confidence in the banking system and the perception that funds in the banking system are liable to (being) ‘hijacked' for other purposes," he said.

Bankers Association of Zimbabwe president Charity Jinya Jinya - who is also the managing director for MBCA Bank - said if the country is to adopt the rand all cost structures have to be first converted into the South African currency.

"The United States dollar is a more stable currency and people want to store their value in a stable currency," she added.

Standard Chartered Bank Zimbabwe chief executive Ralph Watungwa said it was very difficult for the country to escape the "United States dollar trap" without making some hard decisions.

This comes as research has shown that there has not been any economy that has reverted back to its local currency once it has dollarised.

"If we are prepared to go to the South African rand, then we must prepare to go to the Zimbabwean dollar," he said.

Steward Bank chief executive Lance Mabondiani said banks had no problem in adopting any currency that may help improve the liquidity situation in the country.

"We are not opposed to rand adoption. Anything that can help with the liquidity crunch is welcome. Who would say no to the rand as opposed to waiting in a queue for 12 hours?" he said.