SADC wants rand to prop up Zimbabwe economy-report

JOHANNESBURG, July 8 (Reuters) - A regional body wants to rescue Zimbabwe's inflation-ravaged economy by switching to South Africa's currency in exchange for political concessions by President Robert Mugabe, a newspaper reported on Sunday.

South Africa's solid rand currency could help stabilise an economic crisis in Zimbabwe where inflation has rocketed to 4,500 percent, South Africa's Sunday Independent said.

It quoted unidentified sources as saying the Southern African Development Community (SADC) was working on a plan to extend the rand monetary union to Zimbabwe.

The monetary union, under which currencies are pegged to the rand, consists of South Africa, Namibia, Lesotho and Swaziland.

The plan would also involve the central banks in South Africa and Botswana injecting huge amounts of funds into their counterpart in Zimbabwe, the Sunday Independent said.

Mugabe's government this week sought to curb galloping inflation, the highest in the world, by ordering prices of basic goods slashed by half, but this sparked panic buying by shoppers who emptied shop shelves.

SECRET TALKS

To gain the rescue plan, Mugabe's ruling ZANU-PF party would have to agree to major political reforms in secret talks with the opposition due to start in Pretoria on Monday, the paper added.

No officials from the SADC or the South African Foreign Affairs Ministry were immediately available to comment.

SADC Executive Secretary Tonaz Salamao briefed leaders of the grouping about the rescue plan on the sidelines of last week's African Union summit and visited Zimbabwe on Thursday to float the plan with the government there, the paper said.

Southern African leaders at a summit in March asked South African President Thabo Mbeki to forge a deal between Zimbabwe's ruling party and the opposition Movement for Democratic Change.

That followed sharply rising tensions after opposition leader Morgan Tsvangirai and dozens of other MDC members suffered serious injuries after being arrested by police at an aborted prayer rally in Harare.

Mugabe, in power since independence from Britain in 1980, said on Saturday there was no need to create a new constitution, a key demand of the opposition ahead of elections next year.

Mugabe's government last month proposed new changes to allow joint presidential and parliamentary polls in 2008, in which Mugabe has said he will run.

The 83-year-old veteran ruler has accused firms of raising prices as part of plot to unseat him and says the economy has been sabotaged by Western foes, led by Britain.

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Rand set to prop up Zim dollar
Basildon Peta
July 08 2007
Foreign Service

The Southern African Development Community (SADC) is preparing a dramatic plan to rescue the shattered Zimbabwean economy by extending the rand monetary area into Zimbabwe, according to sources.

Tomaz Salamao, the SADC executive secretary, is drafting the plan, which would also include the South African and Botswana reserve banks pumping millions into the Zimbabwe reserve bank, the sources said.
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Aziz Pahad, the South African deputy foreign minister, said this week that Salamao had briefed the South African government about his fact-finding mission to Zimbabwe. He had reported that "the currency has to all intents and purposes collapsed" and that there was no new inward investment except in some sectors of mining.

Pahad added that there were now an estimated 3 million illegal Zimbabwean immigrants in South Africa - which meant the crisis was "affecting us all".

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kilo39 said:

Now Zim can fracture our currency 'stead of theirs.

I expect devaluation of the rand?

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The neighbouring countries would also pump millions into the Zimbabwe reserve bank, effectively propping up the Zimbabwe dollar which has become almost worthless, and put its exchange rate with foreign currencies at the same level as the rand.

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lsuacner said:

One currency can not go up without another depreciating, if the Zim dollar goes up 3% thanks to RSA, we will lose 3% against the dollar.

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Most parastatals are surviving at the mercy of the central bank, which hands them working capital funds financed through the printing mill.

Why does he want attention so much when he knows what will happen to the economy," said Alois Kandere, a manager of a computer consumable shop.

But if Mugabe lives up to his reputation, and seizes firms, SA businesses in Zimbabwe are going to be the worst hit. For instance, Mzi Khumalo's Metallon Gold Zimbabwe, is the country's largest gold producer and accounts for 60% of the country's bullion output while others such as Standard Bank Group, Absa, Anglo, Implats and Aquarius are exposed through their investments in banking and mining sectors.

Maybe after SA's northern neighbour proceeds with nationalisation plans, South Africa's president Thabo Mbeki will drop his "quiet diplomacy" on Zimbabwe...

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lsuacner said:

The collapse of Zim has not affected us so much so far. Why would the official collapse be any different? In the eyes of the EU Zim was over and done for in 2000 when the seizing started. Now we have to save the economy after doing nothing for 7 years? It will only tear down our economy.

The best thing to do for RSA is to officially condemn Mugabe, to make a big fuss concerning his mistakes and to distance ourselves as far as possible.

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lsuacner said:

The collapse of Zim has not affected us so much so far. Why would the official collapse be any different? In the eyes of the EU Zim was over and done for in 2000 when the seizing started. Now we have to save the economy after doing nothing for 7 years? It will only tear down our economy.

The best thing to do for RSA is to officially condemn Mugabe, to make a big fuss concerning his mistakes and to distance ourselves as far as possible.

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lsuacner said:

That had nothing to do with Zimbabwe, was the manipulation/dumping of something. I can't remember what caused the extreme currency fluctuation, but I assure you it was not caused by Zimbabwe.

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