Reserve Bank of Zimbabwe backs rand rejection

The Reserve Bank of Zimbabwe governor Dr John Mangudya has backed businesses rejecting South African rand coins saying doing so is acceptable in managing risks associated with weakening currencies.

Responding to concerns that some traders were now not accepting the rand, which has been on a steady slide against the United States dollar since the beginning of the year, Dr Mangudya said the central bank has come up with measures to cushion the transacting public while consolidating the multiple-currency system.

In an exclusive interview he admitted that the fall of the rand, now trading at $1 to R14,3, has become a problem for businesses, mainly those involved in trade with South Africa. "We're in a multiple-currency system, which provides choice to consumers on what currency to use. If businesses feel there are losses attributed to a particular currency, you can't force them to use it," said Mangudya.

He said Zimbabwe was a better country at the moment because of the multiple-currency regime, noting that public complaints have arisen just because South Africa was a major trading partner to Zimbabwe. He advised businesses and consumers to use the Easylink money transfer platform to exchange the weakening rand for bond coins so as to retain value for their money.

"Our position is that it's not a crime to manage risks associated with a certain currency. What's important is that as RBZ we're providing Easylink platforms across the country where people can exchange their rands to bond coins or dollars," Mangudya said.

"This is meant to ensure that people don't lose value for their money. It's like an official bureau de-change facility. They can also use banks." The central bank boss said Zimbabwe will continue using the multiple-currency system adding that there was no way the country could block the use of the rand at the moment.

"What businesses are doing is a normal and rational business sense. However, we want to maintain the multiple currency system, but ensure people don't lose value for their money. "That's why our prices are indexed in US dollar with other currencies - the rand, yuan, pula and others being used for trading purposes," said Mangudya.

The Easylink facility was introduced as part of the re-orientation of Homelink, a Diaspora arm of the RBZ meant to enhance mobilisation of remittances. Easylink also offers inward and outward international money transfer services as well as provision of convenient consumption products such as Zesa electronic prepaid tokens, medical and funeral assurance at all its 29 branches and through the internet for relatives of Zimbabweans in the Diaspora.

Late last year the RBZ introduced bond coins, which are indexed at par with the United States dollar, as part of measures to tackle the change problem. While there was initial scepticism, a majority of people and businesses now prefer to use bond coins as they have a fair value. One of the country's largest supermarket chains OK, has reportedly stopped accepting South African rand coins from their customers, joining scores of businesses who are complaining over the devaluation of the currency.

South Africa is Zimbabwe's largest trading partner.

Experts say the fall of the rand against the US dollar has rendered Zimbabwe's exports to South Africa expensive and unattractive with imports becoming cheaper. Some OK supermarkets in Bulawayo have put notices citing the latest development. "Please note that we no longer accept rand coins as legal tender for reasons beyond our control. We sincerely apologise for any inconvenience caused," reads a notice at one of the supermarkets.

Other businesses in the country are also refusing rand coin transactions in favour of bond coins and the US$. The development creates inconveniences for the transacting public. The weakening of the rand has been attributed to the economic slowdown in China, the world's largest consumer of raw materials and commodities, mainly from South Africa.

Official comment could not be obtained from OK management.