Conrad Mwanawashe Business Reporter —
THE Confederation of Zimbabwe Industries will approach Government with draft legislation to push for the adoption of the South African rand over the US dollar as the main transacting currency.
The “mock Statutory Instrument” could also include internal devaluation to make local manufacturers export competitive.
Members of the CZI, gathered at the 2017 Economic Outlook Symposium yesterday, said they will adopt “solid action” to advocate the adoption of the rand.
CZI president Busisa Moyo said a committee will work on the draft legislation as the manufacturers believe that adopting the rand could allow for benchmarking and ultimately correction in terms of devaluation, competitiveness and cost correction.
“The other issue is to draft some sort of a mock Statutory Instrument for ‘Randisation’. We have been talking about randisation, individual members of CZI have come out strong on randisation and I think we need to have some sort of action towards this. I do know that companies are already starting to do this and opening rand accounts,” said Mr Moyo.
“We also need to move the RTGS system so that it allows for transferring in rand without having to convert to US dollars. So our banking and economics and CZI chief economist to work on some sort of mock/draft Statutory Instrument on randisation, what it means and we start pushing that forward.
“I think it was mentioned that it will allow to benchmark and ultimately correct in terms of devaluation, competitiveness and cost correction,” he said.
Presenting a paper at the symposium on Liquidity Crisis: Current Situation and Policy Options, Professor Ashok Chakravarti argued that adopting the rand was not complex as Zimbabwe was “very much part of the South African economy”.
“They (SA) are our major trading partner and that is quite adequate and it is normal for a country with such a large integration with another country to accept the currency of that region. It is part of what we call optimal currency theory in economics and it is something that is viable.
“Countries monetise and demonetise, they change their currencies, India for instance has demonetised the 1 000 rupees note and replaced with 500 rupees.
“So adopting the rand is very simple. You fix the exchange rate today and you redenominated everything in the Zimbabwean economy in value. Redenomination is no issue at all,” said Prof Chakravarti.
South Africa is Zimbabwe’s major trading partner with almost 40 percent of imports from that country.
Prof Chakravarti said SA had shown willingness to allow Zimbabwe to use the rand as a transacting currency in discussions held with that country’s officials.
“There have been discussions with the South Africans and they are willing to accommodate us. They are willing to get paid for their exports in Zimbabwe in rand. They are willing to accommodate us in the financial sector and to allow the rand to circulate over here without any problems.
As far as I am concerned there are no economic issues in adopting the rand tomorrow.
“All it needs is a simple law, a Statutory Instrument from Government with an exchange rate redenomination of all the US dollar balances, salaries, prices, everything in rand and saying that from tomorrow the rand is the currency of circulation and everything will be denominated in rand. It will not cause any confusion.
Other countries have done it so there is nothing exceptional about it at all,” said Prof Chakravarti.
Some of the advantages arising from adopting the rand, according to Prof Chakravarti, include that when Zimbabwe becomes part of the regional power house’s economy, financial flows from that side will increase.
Also, the banking system will receive liquidity while it will open up access to the South African financial system.
“That integration will significantly change the whole situation with regards to liquidity. We will have plenty of rand around. I can assure you.
“The diaspora which is mainly remitting R600- R700 million from South Africa and is now getting hesitant to actually remit, will very happily remit rands back to Zimbabwe. There will be no problem at all,” he said.
Prof Chakravarti said informally adopting the rand was different from joining the Common Monetary Area.
“We do not have to join the Common Monetary Area to adopt the rand. This is a long term issues which we can consider and decide whether it is to our benefit or not but the adoption of the adoption can be done overnight. It can be done tomorrow,” he said.