By Bruce Makombe
As the rand takes centre stage in Zimbabwe, it is remarkable just how sudden economic developments transpire. Prior to 2008, Zimbabwe transacted with the Zimbabwean dollar (ZW$) which plunged on Friday 14 November 1997 – the day market participants termed “Black Friday”.
On this day, the Zimbabwean dollar lost over 72 per cent of its value against the greenback. The episode signalled the subsequent economic meltdown and the demise of the Zimbabwean dollar which endured for a decade.
The central bank of Zimbabwe retorted by introducing stringent exchange controls. Despite these controls, international trade persisted – the market dictated and simply foisted the Unites States dollar (US$) on the government.
The US$ dominated despite the government packaging the development as a multi-currency system.
For obvious reasons, the question that nonetheless persisted unrequited then was “why not the South African rand?” For patriotic and many other motives the government of Zimbabwe ostensibly loathed the South African rand.
The other explanation could have been that the South African government was averse to lacing its “stable” economy and currency chalice with the poisoned Zimbabwean economic poison.
Single currency for SADC
Fast forward to 2017. The market fundamentals are back in town – as expected dictating the pace and calling the shots. Given the scarcity of US$ in Zimbabwe, commerce, the government and consumers are once again left with no choice but to accept the South African rand as a medium of exchange.
While there are costs associated with (the presumably forced) adoptions of the rand in Zimbabwe, the arrival and adoption of the South African rand is a welcome development.
This new development will go a long way in eliminating the toxic artificial pricing distortions in the economy and open new avenues for the (over) 5 million Zimbabwean diaspora in South Africa to invest in the country and send money back home easily.
In fact, remittances – estimated at over US$1 bn (R14 bn) per year in 2016 – sent from the Zimbabwean diaspora are a lifeline to the Zimbabwean economy.
The onus is now upon policy makers sitting on both sides of the Limpopo River to take stock of the tipping point and embrace the currency mutation. This transformation presents more opportunities than risks for both countries. Regional economic integration is the panacea for unlocking economic growth and development in the SADC region and Africa.
My case – now is the time to revisit the SADC single currency dream.
Bruce Makombe is a development finance practitioner based in Gauteng. He writes in his personal capacity. Contact him at: firstname.lastname@example.org
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