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AS the South African currency slumped to a six-month low
against major currencies, among them the United States Dollar this week,
Zimbabweans breathed a sigh of relief over the weakening rand – ecstatic that
they would get more rands for their US dollars.
The rand shed 1.8% on Wednesday to trade at R8.5055 to the
greenback fuelled by uncertainty linked to the crisis that has gripped Greece
and the European Union.
The new low surpassed the previous rate recorded last
November of R8.40 against the US dollar.
Economic analysts canvassed by City Press this week
expressed optimism over a weakening rand and pointed out that this would help
contain Zimbabwe’s inflation levels.
Eric Bloch, a senior economist at H&E Bloch, a
consultancy firm said: “The benefits of a weak rand are marginally beneficial
for Zimbabwe in the short term as they will reduce the cost of imports and
which will also help contain inflation levels. It will also assist the poor.”
He added: “The South African economy has been weakening
tremendously and there is no sign that the monetary authorities there have a
solution to end the downturn, so Zimbabwe is set to benefit from this.”
But Bloch fired a caveat that Zimbabwe’s inflation could
rise owing to food shortages linked to a poor harvest that resulted in a maize
shortfall of nearly one million tons.
The country has to rely on food imports, with a bulk of its
grain requirements of 300 000 tons coming in from neighbouring Zambia.
Although South Africa is Zimbabwe’s largest trading partner
on the continent, Zimbabwe has been shy of adopting the rand as its official
currency and joining the rand monetary union – alongside Namibia, Swaziland and
Lesotho.
Instead, the country has preferred to take comfort in a
multi-currency regime, in which US dollars are used alongside the rand and
Botswana pula.
The latter currencies are mainly used in the southern
regions of the country, given their proximity to Botswana and South Africa.
Tony Hawkins, an economics professor at the University of
Zimbabwe said: “with the rand weakening, the South African economy will suffer
and when the South African economy declines, that country will have to restore
their monetary policies and we will be locked in those policies.
“If Zimbabwe were to join now, we will be dragged in these
issues and will suffer needlessly, so it remains a safe bet to keep the
multi-currency system for the foreseeable future”.
Meanwhile, residents in the country’s second largest city
Bulawayo, who have borne the greatest brunt of currency fluctuations between
the US dollar and rand – have emerged as the key beneficiaries of the fall of
the rand.
Cross-border traders plying the Zimbabwe-South Africa route
say they are now able to buy more goods in South Africa for resale in Zimbabwe
and were “hopeful business would continue to pick up”.
Despite the current troubles gripping the South African
economy, Zimbabwe is keen on wooing nations that make up the Brics (Brazil,
Russia, India, China and South Africa) group – with the Industry, Trade and
Commerce Minister Welshman Ncube announcing plans to hold quarterly trade fairs
aimed at strengthening business ties with the developing countries.
Ncube said, “We are in discussion with the emerging
countries that perhaps on a three-monthly basis we can have a China Week, a
Brazil Week or a South Africa Week so that we can enhance bilateral trade
between us.”
He is brimming with optimism but cautions that it is still a
work in progress and “that is the direction we want to move in”.
