Mixed reactions on Rand Monetary Union

by Ronny Zikhali

THE issue of Zimbabwe joining the Rand Monetary Union (RMU) has attracted a lot of attention among economists and policy makers in Zimbabwe and has been received with mixed feelings.
If Zimbabwe joins, it would mean that the country would adopt the Rand as its official currency.
The attraction of joining the monetary union is supported by the claim that joining would bring benefits such as lower transaction costs associated with trading goods and services between countries that use different currencies.
Minister of Finance Tendai Biti recently said three years from now, the country would be a member of the RMU
The Minister of Industry and Commerce, Professor Welshman Ncube was recently quoted as saying the lobby by business people for the country to be part of the rand grouping was at an advanced stage and that what remained was for the Minister of Finance to present a paper to cabinet for deliberations on the issue ahead of the presentation of the budget.
However in his presentation of the annual budget at the beginning of the month, Minister Biti did not mention the RMU.
Prof Ncube said the business community was in support of the country being part of the Rand Monetary Union as it was a good move that would be in the interest of the business community.
In a recent interview, a Bulawayo based economic analyst, Dr Eric Bloc however said joining the RMU would be a total disaster for Zimbabwe.
Dr Bloc said the South African economy was already showing signs of a decline which would lead to the weakening of the Rand.
“With the Rand weakening, the South African economy will suffer and when the South African economy declines, that country will have to restore their monetary policies and we will be locked in those policies. If Zimbabwe were to join now, we will be dragged in these issues and will suffer needlessly,” he said.
Dr Bloc said joining the monetary union would only be beneficial in the short term but had no long -term benefits.
He said at present the multicurrency system was more favourable for the Zimbabwean economy. He said the only solution required was for the Government to introduce a policy which made sure that all businesses followed the official exchange rate worldwide. Dr Bloc said this would reduce confusion over cross-rating.
Cross-rating has been a bone of contention since the introduction of the multi currency system at the beginning of the year.
During a Bulawayo Agenda 2009 in Retrospect meeting attended by civic society, the business community legislature and media at a local hotel on Friday, the Minister of State in the Prime Minister’s Office, Gorden Moyo said he did not agree with Dr Bloc’s sentiments as joining the RMU would be in the best interests of the country’s economy.
He said if Zimbabwe were to adopt a single currency, the South African Rand would be the best option because it is closer to Zimbabwe and it would benefit the country for liquidity purposes.
Other countries in the RMU include Lesotho, Namibia, South Africa and Swaziland. These countries use the rand alongside their own currencies.
Some recent examples of countries coming together to form a currency union include the
monetary unification of East and West Germany; the monetary unification of twelve countries in Europe that now use the euro and more soon to be, the declaration of six West African States-The Gambia, Ghana, Guinea, Liberia, Nigeria and Sierra Leone to create a common currency, the eco, and a West African Monetary Zone (WAMZ).
Sunday News took to the streets of Bulawayo last week to get the general feeling from the ordinary people on Zimbabwe joining the RMU.
“I don’t think it’s a good idea at all. Joining the union would mean that we become a colony of South Africa. We had enough of that during the Smith regime.
‘If you look at all the countries which are in the RMU, they are all South African clones. Most of their policies are based on South African policies. And if we join we will cease to be an independent state,” said Mr Patrick Moyo, a teacher from Entumbane.
Some were of the view that adopting the rand would bring an end to the cross rating problems gripping the country.
“We are tired of the cross-rating madness. The US Dollar is creating confusion in the market and should be done away with and let the rand remain. We do not even have the US Dollar coins in circulation, but there are plenty of rand coins. Joining the RMU would be the perfect solution,” said Mrs Thandanani Dube from Luveve.
Other residents felt that joining the RMU would also bring an end to the problem of change for most businesses.