Zimbabwe’s business leaders want Government to evoke the law in order to enforce economy-wide use of the South African rand and end cash shortages.
An in-house discussion paper by the Confederation of Zimbabwe Industries prescribes denominating all goods and services in rand via a Statutory Instrument.
The paper, “Steps to implement ‘Randisation’ and resolve the liquidity situation”, further proposes converting all salaries and wages into that currency at a specific exchange rate.
Part of the document reads: “This (adoption of the Rand) will transform the cost structures of both Government and the private sector into soft currency from the current hard currency scenario, setting the stage for recovery in competitiveness.
“It will also result in the vast majority of transactions in the market taking place in rand, significantly reducing externalisation risk.”
On automated teller machines dispensing rand notes, the paper says: “This will provide a strong incentive to consumers to take the rand for transaction purposes. This step is recommended because of the current lack of confidence in the banking system and the perception that funds in the banking system are liable to (being) ‘hijacked’ for other purposes.”
The paper, which The Sunday Mail has seen, argues that rand adoption could force price correction and enhance manufacturing competitiveness, paving way for economic growth. Business, according to the document, wants the US dollar to be used solely for external transactions, though remaining in the banking system as a value store.
In addition, CZI proposes that envisaged rand transactions should be conducted via the Sadc Integrated Regional Electronic Settlement System (Siress).
Siress is a regional electronic system that promotes smooth payment settlement and clearance, and eliminates intermediaries — often a United States or European correspondent bank — thereby keeping money in the region.
The South African rand is the choicest currency in Siress.
“Using Siress will ensure that when rand are transferred from bank to bank, they are 100 percent backed by rand available for foreign payments.”
Asked to comment on the paper, CZI president Mr Busisa Moyo said, “We are being misunderstood: We are not calling for adoption of the rand or joining the rand monetary union. What we are calling for is the wider circulation of the rand as part of the solution to the liquidity and competitiveness challenges.
“We are not calling for the dumping of the US dollar; what we are saying is that we need to look at a framework that ensures the little hard currency that we may have is ring-fenced.
“Our argument is that when we adopt the rand, we cannot have an individual coming from, say, Pakistan searching for the rand. We can continue importing US dollars, but history has shown that that alone cannot be a sustainable solution to the problem.”
He added: “It was when the rand started devaluing around 2014 that the market and people started rejecting it. It was the consuming public that was not keen to transact in the rand because everyday they were getting less dollars in exchange for the rand. That is what created the panic.
“But given the changed circumstances that we have now and a more stable rand, we need to have a conversation to say: ‘How do we respond to a volatile rand if we are to use it more widely?’”
Zimbabwe has been reeling under cash shortages since April 2016 mainly due to externalisation and hoarding of the United States dollar.
Though the Reserve Bank of Zimbabwe continues to import cash weekly and offer Bond note incentives, the cash shortages have endured with some increasingly depending on “plastic money”.
The Bankers’ Association of Zimbabwe has previously advocated rand adoption – a proposition monetary authorities have ruled out.
RBZ governor Dr John Mangudya recently told The Sunday Mail that they would actively promote the full multi-currency basket and stimulate manufacturing capacity.
Over the weeks, economists have also argued against rand adoption, citing the currency’s volatility.
Harare-based economist Mr Brains Muchemwa remarked at one point: “In any case, it is still the same uncompetitive currency that the same businesspeople rejected for bond coins not so long ago.”