Agri-Insight
AFTER coming on to the market during a time when it was easier for it to falter than weather the storm, Zimbabwe's currency, the ZiG, has held fort and performed beyond everybody's expectations.
In fact, most people gave it little chance to make an impact on a market that seemed to have made peace with years of economic volatility with hyper-inflation marking the order of the day.
It, however, did not take long for the ZiG to make a bold statement of intent with prices in shops becoming stable and inflation going on a break, as well.
Effectively, this new reality breathed some life into most sectors of the economy, the bulk of which have since started showing signs of rejuvenation.
The agriculture sector is among the major beneficiaries from the currency stability brought about by the ZiG, with agro-dealers becoming the first to endorse its value and immediately accepting it as legal tender.
Besides permeating a fresh breath of air into the rest of the economy's sectors, this new development also gave farmers a fresh hope of producing competitively.
It was unfortunate that the advent of this new currency coincided with the arrival of the El Nino weather phenomenon, which affected high yields.
The most refreshing development is that both farmers and other value chain actors in the agriculture industry have embraced the currency and are all making the most of its power.
The tobacco and cotton sub-sectors, for instance, owe the current stable affairs in their ranks to the power of the ZiG. Before the ZiG entered the fray, there had been numerous price wars for both crops.
At one-point Government raised the payment ratio for tobacco to 85 percent United States dollars and 15 percent RTGS with the hope that farmers would benefit from the larger US-dollar chunk but the sky-high inflation would have none of it.
This time, that ratio has since been revised downwards to 75 percent US dollars and 25 percent ZiG but the excitement in the industry is enough to show that both currencies are performing equally well.
The same story is also unfolding in the cotton industry where the price of a kilogramme of the white gold was set at US$0, 32 that is being paid at the ratio of US$0, 24 and 8ZiG. Some merchants have even ignored this directive to give farmers their earnings in US dollars while others have been doing it to book with farmers making indications that they are happy.
Most farmers that I have chanced to interact with have been full of praise of the ZiG that they say is performing well just like its US counterpart.
Some have even suggested the withdrawal of the US dollar from the market and replace it with the ZiG to ensure the occasional inflation of prices by speculative service providers is nipped in the bud once and for all.
It is refreshing to note that Government has not left anything to chance and adopted a zero-tolerance attitude to currency manipulation, which has seen the streets cleaned of money-changers.
The Reserve Bank of Zimbabwe has also been proactive and is currently seized with building the national gold reserves to back the ZiG through curbing exchange rate volatility and an inflation spiral.
Newly appointed RBZ governor, Dr John Mushayavanhu has increased the gold reserves by about 30 percent in the 100 or so days that he has been in office.
The country now has gold reserves worth around US$370 million.
The Central Bank is now targeting to have accrued at least three tonnes of gold reserves by year-end.
All these efforts backed by Government's ongoing blitz on all forms of currency abuse will most likely see all sectors of the economy performing better than they were doing before the adoption of the ZiG.
One exciting fact is that farmers have started preparations for the 2024/25 farming season in earnest and are buying inputs without difficulties.
All payment methods -- cash, swiping and Ecocash are being accepted.
Most payments for produce under the local currency component are being sent to farmers via EcoCash, hence service providers' acceptance of that payment method could not have come at a better time.
It seems the potency of the ZiG has not just been endorsed within our borders only but internationally with the World Bank recently certifying the ZiG's international currency code (ZWG) to give it a distinct identity among other nations' official currencies. According to the World Bank, a currency code is essential for quoting prices, invoicing, and settling payments in international trade.
The currency code is crucial for the effective functioning of the global financial system and ensures standardisation, accuracy, and efficiency in international financial transactions, trade, and investment.
Not having a currency code can lead to significant challenges, including errors, inefficiencies, and barriers to international trade and investment, analysts have commented.
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The World Bank's gesture certainly comes across as sweet news to those farmers into the export business. With the growing chorus to commercialise farming operations, competitive farmers will obviously extend their scope to international destinations, which makes it crucial for the country to have a recognised currency for ease of doing business.
In line with the push to boost the simplicity of doing business using ZiG, the RBZ has also introduced minor units of the currency known as cents.
ZiG currently has 1ZiG, 2ZiG and ZiG5 coins, ZiG10 and ZiG20 notes in circulation while other big denominations will be introduced in due course in notes form too. At the moment there is about US$80 million worth of ZiG in circulation.
The currency was introduced at ZiG13, 66 to the US dollar, and has not experienced significant changes since then.
This reflects the stability that for long has eluding the Zimbabwe dollar, resulting in volatility that constantly drove prices higher.
The beauty about farming is that it only needs a stable currency that will allow farmers to invest and recoup the money they would have expended especially if the weather does not let them down.
