In a surprise turn of events, last week, the Zimbabwe government announced the end of its multi-currency regime after 10 years.
In this edition of Business Day Spotlight, we focus on what this move means for the Southern African state and possible effects on the region.
Our host Mudiwa Gavaza is joined by Tara O’Connor, founder and executive director of Africa Risk Consulting (ARC) — a firm that advises on pre-investment and expansion strategies for countries such as Algeria, Angola, the Democratic Republic of Congo (DRC), Nigeria, SA, Zambia and Zimbabwe; and regions such as East Africa and the franc zone (as a region), among others.
According to the Reserve Bank of Zimbabwe and the country’s finance ministry, the Zimbabwe dollar is now legal tender. Zimbabweans can no longer trade in the US dollar, SA rand, British pound or Botswana pula, as they have done in the past.
Many questions still remain about what this will mean for foreign investment, confidence in the currency, and people’s savings.
The decision comes as the country’s inflation rate has reached as much as 95% month to month, says O’Connor, adding that this was a move in the wrong direction for the country headed by President Emmerson Mnangagwa.
“History is our best teacher,” she says, referring to the hyperinflation and economic turmoil experienced in Zimbabwe over the past two decades.
Zimbabwe’s issues should be the concern of the region as a whole, particularly SA, O’Connor says. A net importer for a number of years, SA is Zimbabwe’s largest trading partner. The country is said to owe embattled power utility Eskom more than R300m for electricity previously supplied.
O’Connor says leaders in the region, such as President Cyril Ramaphosa, may have to take on the role exhibited by former president Mbeki in 2009, who helped bring about a government of national unity in Zimbabwe with the opposition MDC party, which led to five years of economic growth before Zanu-PF took back the reins in 2013.
Listen in to hear thoughts around these and other questions.
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