Zimbabwe compels rand use amid cash crisis

Zimbabwe's central bank governor, John Mangudya. File picture: Philimon Bulawayo, Reuters

Zimbabwe's central bank governor, John Mangudya. File picture: Philimon Bulawayo, Reuters

Published May 5, 2016

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Harare - Zimbabwe will enforce usage of the rand with exporters receiving half of their proceeds in the South African currency and shops required to accept payments in any of the multiple currencies that Zimbabwe uses as legal tender.

The move comes as Zimbabwe faces cash shortages with banks running out of money and the US dollar becoming the predominant currency.

Read: Once again, Zimbabwe is short of cash

Zimbabwe exports more than 40 percent, and imports 60 percent of goods and products it does not manufacture from South Africa.

Central bank chief John Mangudya said yesterday this necessitated that the government intervene to drum up usage of the rand.

Mangudya said the country would also introduce local bond currency notes, which would be backed by a $200 million (R3 billion) African Export-Import Bank facility.

“In order to restore and promote the widespread usage of currencies, with effect from May 5, 40 percent of all new US dollar foreign exchange receipts from export of goods and services shall be converted by the Reserve Bank at the official exchange rate to rands and 10 percent into euros,” Mangudya said.

Concentration risk

He said the policy was aimed at ensuring that the demand for cash among a wide range of currencies was spread to mitigate against concentration risk, which had resulted in the cash shortages as banks yesterday curbed cash withdrawal to almost $300.

“Product pricing in shops and other service providers would need to be reflective of the multiple currency system. In view of the fact that most products in Zimbabwean shops are from South Africa, it is pertinent that shop owners and businesses should think in rand terms as opposed to abstract US dollar prices.

“Exporters of goods and services will now have their funds converted into rands, euros and US dollars. Shops and other providers of services and goods would also be required to accept payment in multiple currencies as opposed to the current situation where the US dollar has become the dominant legal tender.”

Mangudya said Zimbabwe would expand its money transfer platforms to process fund transfers in rand, euro and the local bond currency in order to address loopholes in the banking system.

He said the use of the US dollar was making Zimbabwe a “high cost producing country”, and a very expensive tourist destination.

“Stronger usage of the greenback had also become a fertile ground for capital flight and externalisation of scarce foreign currency,” Mangudya added.

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