via Zim starts abandoning use of falling SA rand | SW Radio Africa by Alex Bell on Friday, January 24, 2014
A growing number of public institutions, businesses and individuals are beginning to abandon the use of the South African rand, with the value of the neighbouring currency continuing to weaken.
The rand’s value has been steadily falling this year, reaching a five year low in recent weeks. The exchange rate against the US dollar has been fluctuating between R11 and R12 to the $1, and this is causing serious problems in Zimbabwe.
With a multi-currency system in place since 2009, both currencies are legal tender in Zimbabwe. However, there is no set exchange price for the numerous businesses and organisations trading in the two currencies. And for those customers and consumers who often only have access to rands, the situation is becoming worse because more places have stopped accepting the neighbouring currency.
According to a snap survey conducted by the Chronicle newspaper, government institutions such as schools and the Vehicle Inspection Department (VID) were refusing rands and insisting on US dollars. The paper quoted several individuals being turned away and told to bring back ‘real money’.
Economic analyst Masimba Kuchera said the weakening rand was a serious problem for Zimbabwe, which is heavily reliant on imports from its neighbours.
“Our import/export ratio has grown over the last few months, and it means we are importing a lot more than we are exporting, particularly from South Africa. So the weakening of the rand will mean an increase in prices, and a distortion in terms of currency conversions in terms of the US dollar and the South African rand, which causes chaos and confusion in the market,” Kuchera said.
He explained that there is no easy solution for how this affects Zimbabwe, particularly while there are still damaging government policies in place that prevent the country’s economy from recovering.
“What we need is a strong internal solution. We need a strong economy, an economy that can manufacture the goods we consume. We also need policies that can make that happen,” Kuchera said.
He added: “But in this case and at this moment, it will be very difficult for that to happen because of the policies, like indigenization, that are inconsistent with the needs for investment that Zimbabwe requires.”
For individuals Kuchera suggested that they increase their cash reserves of US dollars if possible, and to avoid using street vendors for currency exchanges.
“They must try to us the banking sector. In the past it was the street that was the favorable exchange compared to the banks, but in recent times the banks seem to have better exchange rates. So you may be charged a little for your transaction in the bank, but at least you know you are getting the correct money,” Kuchera said.