South African Rand not an option, says Zimbabwe

THE Reserve Bank of Zimbabwe has continued to turn down overtones to adopt the South African rand as the country's option to cash challenges saying Zimbabwe does not have its own currency which is a pre-request before joining the Common Monetary Area.

Speaking at a SA-Zim Business Connect meeting in Bulawayo on Friday, RBZ Director of Financial Markets, Mr Azvinandaa Saburi clarified that for Zimbabwe to use the rand as people have been advocating for, there are pre-conditions of joining the Common Monetary Area (CMA) with one of them being that Zimbabwe needs to have its own currency which is then matched 1:1 with the Rand.

The CMA links South Africa, Namibia, Lesotho and Swaziland into a monetary union. Although the South African rand is legal tender in all the states, the other member states issue their own currencies: the Lesotho loti, Namibian dollar and Swazi elangeni.

According to the CMA, these are exchanged at par with the rand and there is no immediate prospect of change but foreign exchange regulations and monetary policy throughout the CMA continue to reflect the influence of the South African Reserve Bank

"There is no way that South Africa can print money for those countries in rands otherwise it will face inflation. That is one of the reasons why it is impossible for Zimbabwe to adopt the rand. We will not be seeing the return of the Zimbabwean dollar anytime soon as other fundamentals have to be in place to support our own local currency," said Mr Saburi.

Governor Dr John Mangudya also clarified on the issue of adopting the rand saying people should be careful of what they are asking for as they are in a way requesting the Zim dollar.

"What you are asking for is more dangerous than the bond notes because you are asking for the return of the Zim dollar which we are not ready for. The rand issue is simple, we should have joined in 2009 so you cannot seven years down the line start thinking of that route. By adopting the rand formally, you need to request formally to join as the rand zone has its own criteria and that is why in Zimbabwe we are using a multi-currency system and not even the US dollar only," said Dr Mangudya.

He said South Africa cannot supply the whole region that is why the SACU members also have their own currencies.

Of the SACU members, only Botswana is currently out of the CMA, having replaced the rand with the pula in 1976.

Bankers and industry recommended the adoption of the South African rand as the major transacting currency to reduce concentration of risk associated with heavy reliance on the United States dollar currently accounting for 95 percent of all transactions.

Meanwhile, Mr Saburi said a second phase of the introduction of the bond notes marketing would begin soon and that is the time features of the new notes would be advertised.

"The first phase of the marketing by RBZ was to let people know what the bond notes are. A second phase will be introduced before the end of the month to advertise the features of the bond notes. This will definitely be done before the notes are brought into circulation," he said.

He maintained that the bond notes would be introduced into the market before the end of November. The Government has since gazetted the Reserve Bank of Zimbabwe Amendment Bill 2016 to enable the central bank and Finance and Economic and Development Minister to issue bond notes exchangeable at par value with the United States dollar.