This accusation stems from the decision to introduce into circulation bond notes, at par to the US dollar, to the tune of $200m as a short-term measure to tackle the cash crisis that has seen Zimbabweans queuing at banks for hours every day.
But Mangudya insists the multicurrency regime is there to stay. One of the longer-term issues under consideration is to boost the use of the rand to reduce the countryâ€™s dependence on the US currency.
The rand was part of the multicurrency regime introduced in 2009 to replace the old Zimbabwe dollar â€” a basket of nine currencies including the pound, Botswana pula, Chinese yuan and Indian rupee.
But Zimbabweans have made their preference for the dollar very clear. In 2013, the use of dollars and rand was at about 50-50, but three years later, 95% of people use the dollar. The randâ€™s volatility and rising political risk are concerns that have reduced its popularity.
But it is not practical. SA is the source of 60% of Zimbabweâ€™s imports and the destination of more than 40% of its exports. About 70% of Zimbabweâ€™s tourists come via SA, although numbers are declining as the destination becomes more expensive for rand-bearing visitors.
While using the US dollar as the domestic currency has brought about economic stability in Zimbabwe after the roller-coaster ride of the decade up to 2009, it has not enabled growth. It has contributed to making Zimbabwe a high-cost destination for business and manufacturing, which has undermined the economyâ€™s competitiveness. It has also provided fertile ground for capital flight. Mangudya maintains that nearly $2bn evaporated from the country through externalisation last year, and from having to import goods, mostly from SA.
There is a push to get South African companies, which provide most of the consumer goods for Zimbabweâ€™s well-stocked supermarkets, to manufacture domestically.
Last week, the state-owned newspaper The Herald quoted the deputy industry minister saying that government should demand that South African companies produce within Zimbabwe for that market.
The Herald tends to convey government thinking on issues, and in the past President Robert Mugabe and his ministers have hit out at South African retailers for destroying domestic industry by importing the bulk of their stock from SA, contributing to the serious trade deficit.
Zimbabwe is not alone in pushing foreigners to manufacture locally, with countries such as Nigeria banning a range of goods to this end.
Last year, Zimbabwe banned the importation of secondhand clothes and shoes to protect its domestic industry, and now retailers are lobbying for a ban on finished clothing â€” despite the parlous state of the local industry.
But Zimbabwe is not an attractive prospect for investors right now. Apart from liquidity challenges and the high-cost operating environment, there is also the politics.
The country is riven by fierce faction fighting, and policy-making tends to be driven by political expedience and crisis management. The International Monetary Fundâ€™s approval of Zimbabweâ€™s Staff Monitored Programme and Article IV consultations last week is good news. It opens up the opportunity for eventual debt arrears clearance and new capital inflows. But that is a long-term programme.
In the meantime, many holes have to be plugged. SA is seen as a country that could play a larger role in changing Zimbabweâ€™s trajectory, particularly if it adopts the rand as the main currency. But efforts in this regard raise another fear among Zimbabweans â€” the longstanding fear that this may be the start of Zimbabwe finally becoming the de facto 10th province of SA.
â€¢ Games is CEO of business advisory Africa @ Work. This article is taken from Business Day
Post published in: Business