Zim starts abandoning use of falling SA rand - Zimbabwe Situation

Zim starts abandoning use of falling SA rand

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.

COMMENTS

WORDPRESS: 23
  • comment-avatar

    “Economic analyst Masimba Kuchera said the weakening rand was a serious problem for Zimbabwe.” South Africans get very worried. You are going to be like POVO PETE very very soon.

  • comment-avatar
    chimusoro 4 years

    I have just returned from S.A. I can see 20 to 1 very soon.

  • comment-avatar

    Something that you do not know. The US is pulling the plug. Hold on to your dollars………watch this space…….

  • comment-avatar

    Some other stupid currency is on the cards. WHO TOO told you to watch….. hopefully they also watch and prove Hutu wrong.

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    John Thomas 4 years

    This Kuchera, if correctly quoted, is thick. He is certainly economically illiterate. A weaker rand is good for people who earn dollars. It means that goods from the rand area will be cheaper in dollars. That Kuchera cannot grasp this is surprising. That a journalist is so stupid as to quote this idiot as though he is an authoritive source is, I guess, about right.

    • comment-avatar
      Kevin Watson 4 years

      Maybe the journalist was trying to show how stupid the “economist” is? The declining rand offers serious arbitrage opportunities to the currency traders because as and when the strike season in the platinum sector in South Africa is over the rand will claw back some value. If the US keeps up with its trade and budget deficits and the Chinese economic growth declines then watch the dollar decline against the Euro and Yen. Given that the rand floats against a basket of foreign currencies the schools and others who do not accept it are simply illiterate as any forex website can give you the rate of exchange between rands and dollars.

      • comment-avatar
        Mukanya 4 years

        Watson you must understand where Zims are coming from. The depreciation of our currency to a point of becoming extinct taught us to be careful with currencies. It has become culture to a certain extent. The rand might strengthen as a result of positive changes in the external market, but internal factors such as strikes, corruption, increased government expenditure, possible policy shifts in the ANC due to stiff challenges in the political arena and poor service delivery will continue to put pressure on the rand. Chances of it clawing back to around R8 against the US dollar are slim, unless internal factors are managed very well. In my opinion, the possibility for this depends on change of mindsets in all levels of the South African society.

    • comment-avatar
      Mukanya 4 years

      Very true. I thought a weaker rand enables Zims to import more goods for the same amount of money and pass on the benefits to consumers in the form of lower prices, unless traders are greedy. Large volumes of goods, cheaper prices, higher sales and more profits, I thought so. I am not an economist but I use common sense.

  • comment-avatar

    John Thomas just watch this space… This is beyond us..

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    tsuro magena 4 years

    Support Mugabe and Zimbabwe and you also sink with him. Not that the Western World would sit down and have meeting to say we want to fix South Africa, but the investor only look at someone behaviour an and it gives it him an indication where things are going and put his money elsewhere. Remember the investor is you and me and our pension funds.

    At Mandela’s Funeral the South Africa cheered as Uncle Bob was introduced and any reasonable investor knew he needed to act. Coupled with strikes that haunts the country, South Africa is Zimbabwe Part II.

  • comment-avatar
    Rukweza 4 years

    They were to many strikes last but still zimbabwe remains expensive in pricing

  • comment-avatar
    Rukweza 4 years

    They were to many strikes last but still zimbabwe remains expensive in pricing,what do you expect to produce when companies are being threatened

  • comment-avatar
    Nyoni 4 years

    WATCH THIS SPACE, I LIKE. Zanu must revisit its economic policies . These detrimental policies are not meant for the 21st Century and no thought was given to the outcome. The World bank and others are right in being cautious about giving monies to a corrupt entity. Who would give a thief money unless they were threatened. And who can Zanu threaten?

  • comment-avatar
    Agog 4 years

    Extreme nationalist economics have destroyed the country without any assistance from the demonised West. How they must be laughing at a country that committed suicide and then claimed it was murdered. One has to be ashamed to be associated with such a situation.

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    Dzenyika 4 years

    The economist is right – that’s not good for Zimbabwe.

    If the rand is weaker when salaries and costs are mainly in dollars, it means manufacturers in Zimbabwe can’t compete with those in SA on price.

    So while it is good for people at an individual level in the short-term, it means factories closing and more imports than exports (buying more than you are selling) – the opposite of what is needed for an economic recovery.

    • comment-avatar
      chimusoro 4 years

      Yes! Well put. A double edged sword!

    • comment-avatar
      Mukanya 4 years

      Of course SA benefits in terms of increased exports which should theoretically trigger higher productivity. And, theoretically, Zim will become a giant SA supermarket. But the benefits to ordinary SA citizens will be minimal ultimately. The situation on the ground shows a shrink of disposable income and greater suffering. Eventually low business activity will catch up with business as evidenced by an increase in the number of empty buildings in some towns. In other words, companies are closing shop and unemployment is rising. Hope the trend will be arrested, otherwise SA is another Zim in the making.

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    haranga 4 years

    in simple terms a weak rand destroys local industries producing using the $US. it becomes cheaper to import than turn on local industries. as much as i am scared by the return of the ZW$ it looks like the most likely option for local industries to operate. problem is when gono descendants turn on fidelity printers they may not know when to stop.

  • comment-avatar
    Charles Chamunorwa 4 years

    Zuma supported a stolen election in Zimbabwe and he is now repaying for his sins. He things it is heroic on the world stage to be seen supporting Mugabe. The guy does not see the repurcussions. See what has happened to the Plumtree/Mutare road. Keep on supporting Mugabe at your peril.

  • comment-avatar

    There is no global confidence in zumaland or malema. In de klerks rsa the rate was 4 to 1. It’s a no brainer. Weak rand from our vulture neighbour’s means deflation is well on its way. Zimdollar?

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    dsct 4 years

    I think the bigger picture is being missed here. Zim government has no money, whether it is Rand or US Dollar or any other currency for that matter. They reckon Gono is soon going to take over the Treasury. His history is with the Zim Dollar and make no mistake their only way out of this mess is to pay governmemnt servants with the printed (here we go again?) Zim Dollar.
    Another point.As a tourist to Zim, which I am, the prices in USD in Zimbabwe are ridiculously high. I can go on a holiday to Europe or America for half the price it costs.They are not going to attract anyone till the prices are dropped.

    • comment-avatar
      Mukanya 4 years

      “They are not going to attract anyone till the prices are dropped.” But you are in Zim as a tourist?????????

  • comment-avatar
    dsct 4 years

    Mukanya, I am talking in general terms here. I was not aware it was so expensive until I arrived. My holiday is now over but will think twice before I return. I guess it was my fault for not fully researching the costs before I booked my flights but will not fall into that trap again.