Zimbabwe makes overtures to link to SA rand

The CMA currently encompasses South Africa, Namibia, Lesotho and Swaziland. Similar proposals have been made by Steve Hanke, Cato Institute Senior Fellow and Professor of Applied Economics at Johns Hopkins University, who advocates the creation of a currency board to end Zimbabwe’s spiralling inflation, and by Tomaz Salamao, executive secretary of the Southern African Development Community, SADC. Tomaz has reportedly suggested that Zimbabwe’s depleted foreign reserves be topped up with the South African currency and that Zimbabwe be allowed to join the rand monetary area.

The Zimbabwe government, invoking its sovereignty mantra, initially rejected the suggestion, but IWPR has learnt that it has backed down under the pressure of the imploding economy and proposes issuing Zimbabwean dollars that are fully backed by and convertible into rands at a fixed rate. Under this plan, the currency board will initially be capitalised by South Africa and the rand will be allowed to circulate legally in Zimbabwe. "The rand would effectively prop up the Zimbabwe dollar which has become almost worthless," said a government official. The ultimate aim would be to stabilise the exchange rate of the Zimbabwe dollar and curb hyperinflation, enabling the country to buy foreign exchange and continue to import essential goods. According to diplomatic sources, the price of South Africa’s help will be Mugabe’s commitment to a genuine power-sharing arrangement with the opposition in terms of the agreement signed on the 15th September, 2008, and to farreaching political and economic reforms. The power-sharing deal, which, it was hoped, would halt Zimbabwe’s plunge to destruction, has stalled over the allocation of key cabinet ministries.