South Africa's plan to rescue Zimbabwean economy

Pegging the dollar to the rand is the only realistic option for saving the economy.
It has been confirmed that South Africa is preparing a dramatic rescue plan to revive the shattered Zimbabwean economy by extending the rand monetary area.

The plan, understood to be masterminded by South Africa central bank
governor Tito Mboweni, Finance minister Trevor Manuel and SADC
executive secretary Tomaz Salamao, is tied to political reforms by the
incoming administration. It involves massive cash injections by South
Africa’s reserve bank.

The rescue plan is being put together amid reports that a South African
donation made in December of R300 million to finance the agricultural
season was misused and only benefited supporters of President Robert
Mugabe’s ruling party. The maize, beans, rapoko seed, groundnuts,
sorghum and cowpeas disappeared at GMB depots after South African
suppliers Pannar Seeds, Advanced Seed delivered them. Village heads are
accused of denying MDC supporters access to the SA aid.

Diplomats say the aim of the latest measure is to stabilise the
exchange rate of the Zimbabwe dollar and curb inflation so that the
country could buy foreign exchange and continue importing essential
goods. It is also one of the envisaged changes that will be brought in
by the establishment of an inclusive government this week.

The rand would effectively prop up the Zimbabwe dollar, which is now worthless.

The dramatic rescue plan was first mooted by SADC executive secretary
Tomaz Salamao two years back but was rejected as unworkable.

Salamao is believed to have briefed the SADC leaders about his plan on
the sidelines of the African Union summit in Addis Ababa, Ethiopia,
last week. It is not clear what their response was but it would seem it
has gained currency given Motlanthe’s controlled leak.

Details of the plan are not yet clear but sources said it would entail
extending the rand monetary area – now formally known as the
multilateral monetary area (MMA) – into Zimbabwe.

The MMA now includes South Africa, Namibia, Lesotho and Swaziland. The
rand is legal tender in these countries and their currencies are pegged
to it so that their exchange rates with foreign currencies such as the
US dollar are the same as the rand.

Sources said the plan would not immediately peg the Zimbabwe dollar to
the rand but would stabilise the exchange rate by bringing it under
effective South African monetary control.

John Robertson, a prominent Zimbabwean economist, said it was "the only realistic option" for saving the Zimbabwean economy.

The political and economic plans are reported as being closely linked,
as SADC leaders believe the economic rescue package will be worthless
without fundamental political reforms, including visible steps to show
that Mugabe was now committed to reform.

Mugabe seems to have realised the need for reform as his government
embraced the more realistic foreign exchange rate and allowed use of
multiple currencies alongside the Zimbabwean dollar; semi-legalising a
practice that had become widespread. His national budget, which the MDC
will be expected to implement as holders of the Finance ministry, also
suggests scrapping price controls, moving more towards the MDC’s
recommendations of free markets.

However, the big question is whether Mugabe will surrender effective
control of his economy or make the necessary fundamental political
changes, all of which will threaten his 29-year-long iron grip on power.

The United States and European Union have reacted lukewarmly to the new
political arrangement, and want to see proof of power-sharing and
effective governance before they ease sanctions and release development

Cholera response too late – Muguti

The number of people affected by cholera in Zimbabwe has soared to over 69 000, a survey by the United Nations has shown.

There are fears that these figures, the highest since attaining
independence in 1980, could rise if the humanitarian and health crisis
bedevilling Zimbabwe is not arrested anytime soon.

Already more than 3 000 people have died owing to the slow reaction by
President Robert Mugabe’s government to act quickly and save lives. One
of Mugabe’s ministers, deputy minister Edwin Muguti, has publicly
admitted that had the establishment acted swiftly when the epidemic
broke out in August last year, many lives could have been saved.

"The response is too late, said Muguti adding that the US$516 million
the government has begged for to jump start the country’s health
delivery system was only 50 per cent of the US$1 billion required to
rescue the nation from intensive care.

"We are still in the eye of the storm, we have seen a decline in the
number of deaths, but that is not to say the crisis is over. When
people die from cholera what kills them is dehydration…the deaths in
Zimbabwe were avoidable. We have a serious health crisis right now, the
crisis has reached such levels that intervention is now required. The
(World Vision) intervention has been very timely, very appropriate."

Hope is in the air after the MDC decided to join Zanu (PF) in a unity
government, the nation is optimistic that the disease could be curbed
if parties work together.

Post published in: Agriculture

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