South AFrican Rand Disappears From Zimbabwe
This is virtually the only South African currency still freely available in Zimbabwe - 5 Rand coins, which most shops use for change. The coin in equivalent to 50 US cents in most outlets. As for notes, as soon as people accumulate a good amount of them, they run with them either to the bank or to black market traders, who are offering better rates on the rand than the US$1 to R10 offered by retailers and other sellers of products. This is all just a failure of policy and a failure to plan by the Inclusive Government.
Harare, Zimbabwe 08 August 2009
The South African Rand, the preferred currency for the Inclusive Government of Morgan Tsvangirai and Robert "The Solution" Mugabe, has disappeared from Zimbabwe in the last few weeks.
It used to be that when one went into a shop, they got their change in rands even if they had paid in United States currency. At the time, there were less US dollars than Rands in Zimbabwe. There are also no United States currency coins in Zimbabwe, which means change has always been hard to come by.
As a result, supermarkets and companies are making a killing by forcing people to buy things they do not need in order to use up their odd change, anything from US$0.50 to just below a dollar.
You either buy something for 5 rand (US$0.50) even if you do not need it (mostly you are forced to buy sweets) or forfeit the change.
For the last month or so, the only South African currency one finds are the coins, especially the five rand coin, which most shops are still using to equate to US$0.50. Some supermarkets are trying to go with the current exchange rate, but the lack of small change hampers even this effort.
The problems is that the South African rand has gained in strength against the US dollar.
In fact, a lot companies made an absolute killing by charging people using the common US$1 = 10 SA Rand. This is what they charged people. They then took their Rands to the bank where they got the prevailing rate (the banks in Zimbabwe, unlike the government, use the US Dollar as the primary currency). In he process, the companies made a profit purely by playing the exchange rate.
Some of them have admitted that they made a profit of more than 30% on currency alone using this method.
Right now, the proper exchange rate is US$1 = 8.07 South African rand, but in Zimbabwe, it remains at US$1 = 10 SA Rand. This has never changed, even when the Rand was at 7 to one US dollar.
Ever alert to opportunities, Zimbabwe's shadowy currency black market quickly cottoned on and dealers are back on the streets, especially Roadport in Harare, where they can be seen flagging down vehicles to offer "cross-rate".
They base their cross-rate on the prevailing bank rates, marginally improving on them.
A lot of the South African currency is also being shipped back across the border by traders and shoppers and even ordinary Zimbabweans who deposit it in their South African accounts, but converting it to US dollars.
So, their SA US dollar account will be credited by a third or so more in US dollars than they would actually have earned back in Zimbabwe in Rands.
But, apart from this distortion in the market, the failure by the Inclusive Government to put in place proper policy positions on the use of currencies in Zimbabwe is also contributing.
You have The Solution mouthing off about the return of the Zimbabwe dollar, the PM saying something else the next day, Gideon Gono, the Reserve Bank Governor, saying yet another thing.
South Africa has made it clear that it is willing to bring Zimbabwe into its Monetary Union, which also comprises Namibia, Swaziland and Lesotho.
Yet the inclusive government dithers.
Because like the previous regime of Mugabe alone, this Inclusive Government is also looking out for the interests of its own members, who are benefiting from these distortions. They have the access and the authority and they are abusing it to line their own pockets.