FINANCE and Economic Development Minister Mthuli Ncube has said the possibility of Zimbabwe either adopting the SA rand as its main currency of trade – alongside its local unit, the RTGS dollar – or joining the rand monetary union was “not under consideration”.
Ncube told media on the sidelines of the third session of the bi-national commission between South Africa and Zimbabwe on Tuesday in Harare that the country had “completed its currency changes” and the adoption of the rand was unnecessary.
One of the key requirements of the monetary union is that member states have a local currency of their own. The current members of the union are South Africa, Swaziland, Lesotho and Namibia.
After a decade without a currency of its own, last month monetary authorities in Zimbabwe introduced a domestic currency. The RTGS dollar is a fusion of electronic bank balances, bond notes and bond coins.
The new currency is officially trading at 2.5 to the US dollar, according to the interbank market rate. On the black market, however, it is much weaker and trades at about 3.6 to the dollar.
“We have completed the currency changes and we want to continue now on the path of fiscal reforms. We need to be competitive and a local currency is necessary. The rand, just like the US dollar, is foreign currency,” said Ncube, adding that joining the rand monetary union “is not under consideration as we have a domestic currency”.
As Zimbabwe’s economic meltdown takes its toll, various industries in the country have recently expressed a desire for the rand to be used, given the close ties between SA and Zimbabwe. Experts have also frowned on the continued use of the US dollar as it is too strong for Zimbabwe’s economy, a situation that has made local goods uncompetitive.
SA is Zimbabwe’s largest trading partner in the region and is estimated to account for nearly 55% of all imports. More than 120 South African companies have operations in Zimbabwe spread out across mining, retail, financial services, aviation and agriculture.
Ncube said the bi-national commission had also focused on money owed to SA firms in revenue and dividend payments that are currently “stuck” in the country . “We will accommodate South African companies and continue to work at ensuring their funds are repatriated,” he said.
South African Airways is among the SA companies most affected by Zimbabwe’s forex crunch, with an estimated R1 billion in revenues stuck in the country.
Meanwhile, the commission, which has tabled 45 agreements between the two countries, did not agree on any financial package being extended by SA to Zimbabwe.
President Cyril Ramaphosa said the issue of a bailout was discussed with a view to finding lasting solutions to the problems faced by the two countries.
“Our discussions have covered a wide range of issues – investment, trade, mining … We did not focus on one issue. We will have continued dialogue, investment and financial co-operation as we traverse the challenges faced,” he said.
Zimbabwean president Emmerson Mnangagwa said the economic prosperity of the two countries were closely linked and any economic regression by one country would have “a pull-down effect” on the other.
Zimbabwe’s foreign affairs minister Sibusiso Moyo, who read the joint communiqué of the commission, said “a facility for Zimbabwe was being explored” that would encourage co-operation in the private sector.