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Zim gains from weaker rand

Jun 03 2012 11:22 City Press

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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”. 

zimbabwe  |  markets  |  rand  |  sa economy  |  dollar
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