Zim rand plans 'good for SA'

Johannesburg - Zimbabwe's proposal to adopt the rand as a currency would be one of the better alternatives for both Zimbabwe and South Africa.

This is according to Investment Solutions economist Chris Hart, who spoke to Chris Gibbons on Fin24's AM Stock Take earlier on Wednesday.

"It makes the best sense to adopt the rand specifically because of the closeness of the economic relationship," said Hart.

"It will help to reduce transaction costs and ultimately set the country on the path to recovery. I definitely believe this is the right way for Zim to go," he added.

Zimbabwe has used several foreign currencies since the beginning of 2009, after the Zimbabwean dollar was rendered almost worthless because of hyper-inflation and the near-collapse of the country's economy.

Zimbabwe's Industry and Commerce Minister Welshman Ncube on Tuesday indicated that the southern African country is considering adopting the rand.

"We need another solution. We cannot continue forever with multiple currencies," said Ncube, who was attending the Africa Forum in Zimbabwe.

"If we can at least join the rand monetary union, we will have money allocated to Zimbabwe through that system," he added.

The rand monetary union is primarily made up of South Africa, Lesotho and Swaziland. The rand circulates freely through these countries and their foreign exchange regulations and monetary policies are in line with those adopted by the South African Reserve Bank.

Hart said the benefits of Zimbabwe adopting the rand outweigh the costs to South Africa.

"At this stage the pressure on SA's social services is probably greater if we have Zimbabwe as a dysfunctional neighbour," he said.

"We also need to bear in mind that in terms of relative size you are talking about an economy worth $240bn to $250bn in the case of SA, as opposed to $2bn to $3bn in the case of Zimbabwe."

- Fin24.com