Rand loses sparkle
“THE South African rand is now worthless,” fumed Promise Muleya, a public transporter plying the 300km Bulawayo-Beitbridge route.
Muleya’s views echo the growing sentiment of many citizens in the southern part of the country over the continued weakening of the South African rand against the United States dollar.
“I now prefer to charge my clients in US dollars for the trip from Bulawayo to Beitbridge,” he said.
The South African rand is at an all time low in nearly 14 years.
It is presently hovering at an exchange rate of US$1 to R14,40.
Economic observers expect the slide to continue further downhill amid projections that the unit would soften to beyond the US$1 to R15 mark before the end of the year.
Residents and businesses in the southern parts of the country have begun to prepare themselves for the worst, by preferring to transact mainly in US dollars and bond coins — whenever they can.
The latter, introduced by the central bank last December, faced a slow uptake from the transacting public earlier this year.
Nervous depositors who had their fingers burnt in the past by the demise of the Zimbabwe dollar and the collapse of the financial services sector were initially skeptical about the bond coins.
A number of them feared that the bond coins were a precursor towards the reintroduction of the defunct Zimbabwe dollar.
These fears have so far been proven to be false, with the Reserve Bank of Zimbabwe governor, John Mangudya, reiterating time without number that government intended to keep the multi-currency system for the long haul.
As the rand steadily weakens, demand for the bond coins has increased.
Even big businesses have joined in the resistance against the rand, preferring to use bond coins.
Many of the country’s major supermarkets are no longer accepting payment in rand coins, although they are allowing transactions in rand notes.
“Please note that we no longer accept rand coins as legal tender…any inconvenience caused is sincerely regretted,” reads a notice at one supermarket in central Bulawayo.
“We will only accept the rand coins when we are told to do so; but for the past week we have not been taking any rand coins,” said one supermarket employee, who, however, refused to be named.
Significant trade between South Africa and Zimbabwe makes it unlikely that Harare would at the first signs of a falling rand walk away.
Imports from South Africa amounted to US$1,617 billion, while exports to South Africa totaled US$1,2 billion this year.
Zimbabwe reduced its trade deficit with South Africa in the nine months to September 30 by 34 percent to US$417 million compared to US$681 million last year, the latest figures from the Zimbabwe National Statistical Agency (ZimStats) have shown.
Overall, Zimbabwe’s trade deficit in the nine months to September stood at US$2,3 billion after imports of US$4 billion and exports of US$1,7 billion, with the deficit seen at US$3 billion by year end, ZimStats said.
Economist John Robertson said the fall of the rand was not enough to warrant its removal from the basket of multi-currencies just yet.
“It is just a passing phase. What we have seen so far is just increasing arguments depending on whether you are buying or selling. The rand is still being used in Zimbabwe. Those who are rejecting it are in small numbers; such as commuter bus operators and the like. Those who have thousands of rands are using them,” said Robertson.
“The volatility is just a passing phase, it (rand) will bounce back soon,” said Robertson.
While locals in the country’s second largest city of Bulawayo are all smiles over strengthening US dollar which has increased their buying power, its weakness bodes for a gloomy festive season especially for those resident in South Africa, who would be coming back home for the Christmas holidays.
“Injiva”, as locals who live in South Africa are popularly known, are likely to be undone by the weakened rand. Injiva are expected to start trooping back into the country in the first week of next month to spend the Christmas break with their families.
“Those in South Africa are still getting the same income and that has not increased at the same rate as the rand has lost its value. When they come here, they will find it hard to adjust to the reality that the same R1 000 they spent last year is now at almost half the value,” Robertson added.
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