3 October 2013

Zimbabwe: Rand Dips, Puts Smiles on Locals

THE weakening of the South African rand against the United States dollar has put smiles on the faces of Zimbabweans in the southern parts of the country who now have much more cash to spend.

The rand is commonly used in southern Zimbabwe because of its proximity to the southern neighbour.

It is one of the currencies in use under the present multi-currency system, adopted in February 2009 after persistent inflationary attacks condemned the Zimbabwe dollar into a worthless currency.

Bulawayo residents, especially cross-border traders, are cashing in on the weakening rand by buying more goods with their US dollars for resale.

Brett Chulu, an economic commentator, said transport had also become cheaper as a result of a fluctuating rand.

"Bulawayo illustrates the benefits of a weakening rand to locals. With a dollar, local commuters can now do trips. When the rand is stronger, locals in Bulawayo would need to top up with two or three rands more," he said.

The rand, alongside other currencies from developing nations such as the Indian rupee and Brazilian real have taken a dip in the past month in light of the US economic stagnation and political events in the European Union.

It has been hovering at the US$1/R10 to the greenback for weeks now, after it slipped to its record low of US$1/R10,56 last month.

The unrest in the gold mining sector and a wave of strikes in different sectors that hit South Africa last month are cited by economic observers as factors that contributed to the slide of the rand.

Forecasts predict that the rand may slip even further to US$1/R11,38 in the future should the unrest in the mines and wage negotiations persists.

"The rand has been weakening for over a year now. We are net importers in relation to South Africa. A weakening rand, all things being equal may see further softening of prices of foodstuffs imported from South Africa," said Chulu.

"That may be good for consumers, but of course the local food manufacturers may further lose out from even cheaper foodstuffs being imported from South Africa. That may also impact on their ability to meet monthly obligations such as wages."

Monetary authorities have resisted pressure from industry captains to trade solely in the rand and join the rand union, in which the rand is already in wide circulation in Swaziland, Namibia and Lesotho.

They cite the volatility of the rand as a major factor which has held them back from taking such a decisive step.

South Africa is Zimbabwe's largest trading partner, with trade last year estimated at nearly US$2,2 billion.

Its interests in Zimbabwe are spread out across the financial services sector, mines, transport, agriculture and construction.

Nearly 65 percent of finished products in supermarkets are estimated to be imports from South Africa - a situation that has dented the revival of the manufacturing sector, operating at nearly 39 percent capacity.

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