Motlanthe: Zim may adopt rand

[Albereth]

It's not going to happen, but, if it did, it may be a good thing in that Zimbabwe (ie Mugabe) would lose control of all monetary policy after adopting the Rand. While he would still hold political control he would no longer have any economic control.

What economic control? It doesn't exist. Zimbabwe does not have an economy worth speaking of in global terms. Running a printing press is not an economy.

What political control? The MDC has the majority in parliament.

Ugly Bob has military control. He is a tinpot dictator and should be shot in the face.

 

[Sherbang]

What economic control? It doesn't exist. Zimbabwe does not have an economy worth speaking of in global terms. Running a printing press is not an economy.

What political control? The MDC has the majority in parliament.

Ugly Bob has military control. He is a tinpot dictator and should be shot in the face.

That's exactly why it might be a good idea to adopt the Rand, takes the ability to just print money willy nilly away from bob. And the Zimbabwean economy is now so tiny that any influence on South Africa will be equally tiny. And if things should turn around in Zimbabwe at some point in the future, we benefit.

As far as diluting the currency, the Rand is already accepted as the main form of currency there anyway, and there are currently over 3 million Zimbabweans living in South Africa, sending whatever Rands they can get back home, so the dilution is happening anyway.

 

[mac_mac74]

That's exactly why it might be a good idea to adopt the Rand, takes the ability to just print money willy nilly away from bob. And the Zimbabwean economy is now so tiny that any influence on South Africa will be equally tiny. And if things should turn around in Zimbabwe at some point in the future, we benefit.

As far as diluting the currency, the Rand is already accepted as the main form of currency there anyway, and there are currently over 3 million Zimbabweans living in South Africa, sending whatever Rands they can get back home, so the dilution is happening anyway.

if the rest of the world sees any association between the Rand and Zim , in terms of them adopting our currency, it will head south.

it is an extremely fickle currency, Tito just has too spend too much time in the crapper and the rest of the world makes assumptions, down goes the rand

 

[cory85]

Dont write it off, i think these idiots might just do it
http://www.zasucks.com/wp-content/uploads/2009/02/zuma-note.jpg

Harare - Zimbabwe's central bank governor Gideon Gono has welcomed the idea of adopting South Africa's rand currency as an anchor for the virtually worthless Zimbabwean dollar, state media reported on Wednesday.

"Suffice to say that an anchor currency for the Zimbabwe dollar ... would act as a serious stimulus factor towards the much-needed stability of the Zimbabwean dollar and the economy in general and, (is) therefore most welcome," Gono told the state-owned Herald newspaper.

South African President Kgalema Motlanthe on Sunday said Zimbabwe could adopt the rand, but did not give details.

South African central bank spokesperson Samantha Henkeman said the Reserve Bank had not been formally approached about the proposal and so declined to comment.

Namibia, Swaziland and Lesotho all use the rand alongside their own currencies but South Africa's Reserve Bank Governor Tito Mboweni has in the past ruled out a formal arrangement with Zimbabwe.

Gono's comments came as Zimbabwe's opposition leader Morgan Tsvangirai prepared to take office as prime minister on Wednesday in a deal with old rival President Robert Mugabe aimed at saving the ruined country.

The new government is faced with taming hyperinflation which means prices double every day. The central bank has repeatedly revalued its dollar and lopped another 12 zeros off the battered currency earlier this month.

The rand is already used widely on Zimbabwe's black market.

Gono said there were several factors to be considered before the countries could be linked.

"These are not matters that can be done overnight, so I don't want anyone to underestimate these technical processes and harmonisation," Gono added.

"Furthermore, the country is going through a momentous period of change not only in the area of the economy, but the political landscape as well."

The rand was little changed on the news, trading 0.91% firmer against the US dollar at R9.85.

- Reuters

http://www.fin24.com/articles/defau...icleId=1518-25_2467899&IsColumnistStory=False

 

[milomak]

I fear many of you have no idea about the concept of Dollarisation. Yes even if Zim uses the Rand that is what the process is called.

There is already Rand leaving South Africa for Zim. That is what will be used to make the concept work. See Argentina when they Dollarised and how the Fed didn't print any new US Dollars to support that.

 

[DJ...]

I fear many of you have no idea about the concept of Dollarisation. Yes even if Zim uses the Rand that is what the process is called.

There is already Rand leaving South Africa for Zim. That is what will be used to make the concept work. See Argentina when they Dollarised and how the Fed didn't print any new US Dollars to support that.

Baloney. The only benefit of dollarisation is seigneurage (which is effectively the cost of printing money vs the cost of the life cycle of that same note/coin - yes, I know exactly wat you're talking about milomak). How in fsck SA expects this to have any positive affect is beyond me. Dollarisation has proven to be a balls-up in the countries who have adopted this option. It just doesn't work, and unfortunately, there are few ways in which to measure it's effectiveness once the currency becomes de-facto. Take Ecuador for instanace, it only served to weaken the dollar (albeit by a small amount, but it did).

Dollarisation is a concept intended only to bail out a country which you stand to benefit from in the long run - and like I've already stated, BAT's interests in Zim will hardly do much over the short/medium term. In the long term it might work if one incorporates the full extent on Zim's agriculrural oportunities, however it requires political stability first - that is the first and utmost point that needs to be addressed. And by adopting it before political stability is achieved is just bloody ludicrous. They could institute a new currency which tracked the rand instead, somewhat like Argentina did, which would be perfectly acceptable, as they still benefit from a solid currency while not affecting it at all - that should be recommendation #1 imo if they really have more than the brain of an ox-mule between them. But no, they decide to publicly state their intentions regarding full integration.

What a bunch of fscking morons. They really need someone to proof read their thoughts instead of their statements...

 

[Sherbang]

Baloney. The only benefit of dollarisation is seigneurage (which is effectively the cost of printing money vs the cost of the life cycle of that same note/coin - yes, I know exactly wat you're talking about milomak). How in fsck SA expects this to have any positive affect is beyond me. Dollarisation has proven to be a balls-up in the countries who have adopted this option. It just doesn't work, and unfortunately, there are few ways in which to measure it's effectiveness once the currency becomes de-facto. Take Ecuador for instanace, it only served to weaken the dollar (albeit by a small amount, but it did).

Dollarisation is a concept intended only to bail out a country which you stand to benefit from in the long run - and like I've already stated, BAT's interests in Zim will hardly do much over the short/medium term. In the long term it might work if one incorporates the full extent on Zim's agriculrural oportunities, however it requires political stability first - that is the first and utmost point that needs to be addressed. And by adopting it before political stability is achieved is just bloody ludicrous. They could institute a new currency which tracked the rand instead, somewhat like Argentina did, which would be perfectly acceptable, as they still benefit from a solid currency while not affecting it at all - that should be recommendation #1 imo if they really have more than the brain of an ox-mule between them. But no, they decide to publicly state their intentions regarding full integration.

What a bunch of fscking morons. They really need someone to proof read their thoughts instead of their statements...

dude, quit with the ad-hominum attacks, your arguments are really strong enough to stand on their own, without your i'm-right-and-everyone-else-is-stupid condescending attitude, which actually detracts from the good points you make. OK, maybe you're correct, maybe not. It might be the case that economic stability and regeneration is a prerequisite to political stability, or perhaps history shows differently - as you point out. There are many good arguments for and against dollarization, calling people stupid and morons isn't among them.

 

[DJ...]

dude, quit with the ad-hominum attacks, your arguments are really strong enough to stand on their own, without your i'm-right-and-everyone-else-is-stupid condescending attitude, which actually detracts from the good points you make. OK, maybe you're correct, maybe not. It might be the case that economic stability and regeneration is a prerequisite to political stability, or perhaps history shows differently - as you point out. There are many good arguments for and against dollarization, calling people stupid and morons isn't among them.

You clearly don't know me very well on this forum. I call a spade a spade, and if the SA govt want to act like a bunch of morons then I'm going to call them on it. milomak knows me better though, I'm pretty sure he didn't take it a personal insult...

 

[Albereth]

That's exactly why it might be a good idea to adopt the Rand, takes the ability to just print money willy nilly away from bob. And the Zimbabwean economy is now so tiny that any influence on South Africa will be equally tiny. And if things should turn around in Zimbabwe at some point in the future, we benefit.

As far as diluting the currency, the Rand is already accepted as the main form of currency there anyway, and there are currently over 3 million Zimbabweans living in South Africa, sending whatever Rands they can get back home, so the dilution is happening anyway.

In order to adopt another curreny there will need to be an exchange program to replace the zim dollar with the new note. It doesn't happen instantaneously. The zim economy isn't tiny - it is nonexistent on some levels and very big on others.

Rand notes flowing out of a country does not dilute it - printing more dilutes it. And the rand is only of value in zim if it can be exchanged for something in ZA.

 

[boramk]

That's exactly why it might be a good idea to adopt the Rand, takes the ability to just print money willy nilly away from bob. And the Zimbabwean economy is now so tiny that any influence on South Africa will be equally tiny. And if things should turn around in Zimbabwe at some point in the future, we benefit.

As far as diluting the currency, the Rand is already accepted as the main form of currency there anyway, and there are currently over 3 million Zimbabweans living in South Africa, sending whatever Rands they can get back home, so the dilution is happening anyway.

Flip you're a toss. Read DJK's posts, you've agreed they are good arguments, BECAUSE they are.

Do you honestly think because Zimbabwe's economy is so tiny it wont affect us?
Like the idiot who said making them use Rands increases "demand" for Rands to push the Rand to R6/$, wouldn't we have done that a long time ago?
Wow a tiny country can make everything better and increase the value of our currency by 40%

Do you have any idea what the dilution of currency means?
The Rand is not the official currency there, they still use the Zim Dollar the most


With your logic, the Mexico should adopt the dollar, seeing as the ratio of the size of their economy is about the same as SA and Zimbabwe. Mexicans will be living life better and the dollar's value will be stronger?? Think again (Mexico does not even have hyperinflation!). What are the implications of this action??

 

[Sherbang]

Flip you're a toss...

What are on about? Besides insulting me ad-hominum.
or is anyone who disagrees with you just dismissed as a toss?

Do you honestly think because Zimbabwe's economy is so tiny it wont affect us?

I never said Zimbabwe's economy is so tiny it wont affect us, I said the effect will be tiny. Compared to the potential benefits of such a move to Zimbabwe.

According to the CIA factbook, the Zimbabwean economy is only about 1/25th the size of South Africa's, so the effect on individual South Africans could be quite small if the deal were priced correctly.

http://www.politicsweb.co.za/politicsweb/view/politicsweb/en/page71619?oid=117079&sn=Detail

Do you have any idea what the dilution of currency means?
The Rand is not the official currency there, they still use the Zim Dollar the most

Um... yeah... if the Rand was the official currency there we wouldn't be having this discussion now would we?

So boramk, why don't you explain to me what dilution of currency means, and how it relates to dollarization instead of just being insulting. You're obviously such a smart guy, educate me.

The reality is that only a small number of state-owned organizations still charge in the local currency. US dollars are mostly used followed by South African Rands. The reality is that if something radical is not done Zimbabwe will collapse into further chaos.

And I'm not the only 'toss' who thinks dollarization is an option. Well known US economist Steve Hanke:

The only way the (recovery) switch will be turned on and the death spiral will stop is if there is some sound money alternative that comes in and sweeps the Reserve Bank away."

Hanke said the Zimbabwean economy is being "spontaneously dollarized" through what economists call "currency substitution," in which businesses and consumers abandon money which is losing value to migrate to currencies that are more reliable stores of value.

Hanke outlined three options for turning the inflation-riddled Zimbabwean economy around: full dollarization, with the Zimbabwe dollar abandoned; a currency board system under which a new Zimbabwe dollar would be fully convertible into a reserve currency at a fixed exchange rate, requiring 100% of foreign reserves backing up the local currency; or a so-called free banking system in which private banks would issue their own reserve-backed notes.

http://www.voanews.com/english/Africa/Zimbabwe/2009-02-03-voa65.cfm

With your logic, the Mexico should adopt the dollar, seeing as the ratio of the size of their economy is about the same as SA and Zimbabwe. Mexicans will be living life better and the dollar's value will be stronger?? Think again (Mexico does not even have hyperinflation!). What are the implications of this action??

There is no similarity between zimbabwe and mexico. Mexico doesn't have an economy that desperately needs stabilization. The implications are the stabilizing of a neighboring economy currently in the grips of hyper inflation due to serious monetary mismanagement. Zimbabwe is in a desperate position, and because of this, South Africa is threatened.

 

[DJ...]

joelus - why must we bear the brunt of their inadequacies? I've posted why from an economic perspective this would dilute the currency and have no real benefits. I've asked you to state your reasoning as to why you believe it won't have any negative impact - I'd like to understand how you came to this conclusion.

Why should SA bail them out financially and take the hit on the rand? There are better alternatives which I posted as well (the Argentina example) - surely it makes sense to track the rand instead of influencing it? Do you have any idea what a detrimental move this would be from a foreign investment perspective? Especially during the turbulent global financial times we find ourselves in? Let the economy collapse - stop bailing them out ffs. Only once it has fully collapsed can something be done about it imo because Mad Bob is not about to relinquish his position. Unfortunately SA politicians support this tyrant and that is the major issue here - they're suggesting we bear the brunt of his cock-ups. Not a bloody chance in hell will I support a move like this, until Zanu PF are completely removed from any form of political power and interference - until then, the country will continue to fail, regardless of what any other country tries to do for them...

 

[Flanders]

Let the economy collapse - stop bailing them out ffs. Only once it has fully collapsed can something be done about it imo because Mad Bob is not about to relinquish his position. Unfortunately SA politicians support this tyrant and that is the major issue here - they're suggesting we bear the brunt of his cock-ups. Not a bloody chance in hell will I support a move like this, until Zanu PF are completely removed from any form of political power and interference - until then, the country will continue to fail, regardless of what any other country tries to do for them...

Plus 100 beeellion. Yen.

 

[Sherbang]

joelus - why must we bear the brunt of their inadequacies? I've posted why from an economic perspective this would dilute the currency and have no real benefits. I've asked you to state your reasoning as to why you believe it won't have any negative impact - I'd like to understand how you came to this conclusion.

Why should SA bail them out financially and take the hit on the rand?

I think it is in our best interest to stabalise Zimbabwe as soon as possible.
The impact of the collapse of Zimbabwe’s economy can already be felt here. Over 3 million refugees, cholera epidemics, etc. If the issue isn't dealt with decisively the results will be catastrophic for the entire region.
I don't know if dollarization is the best option, but it is a option and I think it's worth discussing the pro's as well as the cons.

There are better alternatives which I posted as well (the Argentina example) - surely it makes sense to track the rand instead of influencing it?

I'll admit I'm not sure how this would work exactly. What would stop the Zimbabwean government from just printing as much money as they want. As they have been doing and which is what brought on such radical hyper-inflation in the first place.

Do you have any idea what a detrimental move this would be from a foreign investment perspective? Especially during the turbulent global financial times we find ourselves in?

I really don't have any idea what effect this would have on foreign investment? I'm not sure you do either. Or if you do you haven't backed up your assertion that it would be detrimental.

Let the economy collapse - stop bailing them out ffs. Only once it has fully collapsed can something be done about it imo because Mad Bob is not about to relinquish his position. Unfortunately SA politicians support this tyrant and that is the major issue here - they're suggesting we bear the brunt of his cock-ups. Not a bloody chance in hell will I support a move like this, until Zanu PF are completely removed from any form of political power and interference - until then, the country will continue to fail, regardless of what any other country tries to do for them...

I think we're in more danger if we don't do something. Doing nothing hasn't helped thus far, it's not going to help into the future either. South Africa will be affected badly if their economy collapses totally and the risks to us are huge if things don't turn around there.

You say let the economy collapse, but I think the known risks to SA of a collapsed Zim economy far outweigh the unknown risk of foreign investment relations.

 

[icyrus]

You say let the economy collapse, but I think the known risks to SA of a collapsed Zim economy far outweigh the unknown risk of foreign investment relations.

All South Africa should do with Zim is return all the illegal Zimbabweans here to Zim, cut all ties and then properly enforce the border.

 

[DJ...]

I think it is in our best interest to stabalise Zimbabwe as soon as possible.
The impact of the collapse of Zimbabwe’s economy can already be felt here. Over 3 million refugees, cholera epidemics, etc. If the issue isn't dealt with decisively the results will be catastrophic for the entire region.
I don't know if dollarization is the best option, but it is a option and I think it's worth discussing the pro's as well as the cons.

That's a humanitarian issue, not a financial one - it's political instability that has caused this. As I've stated already, the cause of their issues are not borne out of financial mismanagement entirely - in fact the financial crisis is a symptom of their piss-poor politics - treat the symptom and not the cause and you're stuck with the same issues still. You just prolong them and now it becomes SA's issue - not a very good idea, surely?

I really don't have any idea what effect this would have on foreign investment? I'm not sure you do either. Or if you do you haven't backed up your assertion that it would be detrimental.

Foreign investment is based on perception of political and financial stability within a country. One of my previous positions involved research in this area so while I might not be an expert on the matter, my common sense tells me that adopting a failing economy into ours without rooting out the cause of the issues will result in a withdrawal of foreign investment in SA - it's pretty logical. And this coming at a time when the 1st world economies are already limiting exposure to 3rd world markets due to the financial crisis. Foreign investment is under pressure as it is and the last thing one would want to do is create the perception that we are exposing our own currency to Zimbabwe's politics. Like I've stated already, remove the cause, don't treat the symptom. This isn't the flu that just passes by if you treat the symptoms, this is more like lung cancer, and Bob's exhaling tobacco (how apt an analogy) all over his people.

I think we're in more danger if we don't do something. Doing nothing hasn't helped thus far, it's not going to help into the future either. South Africa will be affected badly if their economy collapses totally and the risks to us are huge if things don't turn around there.

So beef up the border control. You're talking about the failings of our own government to prevent illegal immigrants entering the country as if this is an accepted norm and we should just look past that point. The illegal immigrant issue is exactly that - illegal. It shouldn't be used as a justification for bailing out Mad Bob and his cronies. However one can't just ignore the fact that it is happening (I assume this would be your argument now), so: how will Zim adopting the rand change this if ZanuPF is still in power? The dollarisation won't change their politics and their lack of a democracy. It is tyrannical dictatorship (one thing I'm sure you can agree on), and therefore how on earth would this be a good thing for SA.

But you still haven't pointed out how this would not dilute our currency - in the end, we're just bearing the brunt for their cock-ups again. Why should you feel the hit in your pocket while Mad Bob continues to exhale cancer all over his people? Do you not see now where the true motivation for this stems from? ANC bailing out a comrade up north - simple as that. It has buggerall to do with helping the people. They have been flooding to SA for years now already in their droves - their economy is already practically kaput - let it take the next step and fail completely and get rid of Mad Bob - then the world can move on with steps like these to address the plight of the people.

You say let the economy collapse, but I think the known risks to SA of a collapsed Zim economy far outweigh the unknown risk of foreign investment relations.

As I've posted, foreign investment is not the only risk - I've pointed out numerous risks. Well a risk implies that the downside could or couldn't happen - wrong, it will happen. You mention it would be good for Zim - well Zim isn't our priority - SA is. This mindset of help a brother to your own detriment is disturbing. We should look after SA, first and foremost. Beef up border control and let the country implode. Either that or assassinate Mad Bob at a ZanuPF supporters rally imo. That tyrant needs to be permanently removed from earth very swiftly. Until the day that ZanuPF and their poorly-implemented communist ideologies are removed completely from political influence, there is very little anyone can do for them.

The common them in this post being do not treat the cause, treat the symptom. The financial issues are a symptom of something much bigger - they are not the cause of Zim's plight - would you not agree?

 

[Vrotappel]

All South Africa should do with Zim is return all the illegal Zimbabweans here to Zim, cut all ties and then properly enforce the border.

I agree 100%, before the ANC tries to force these crazy ideas upon us the taxpayers of SA (the ones registered with SARS) should have a national referendum on it. We have sponsored the zimmers enough.

 

[Flanders]

That's a humanitarian issue, not a financial one - it's political instability that has caused this. As I've stated already, the cause of their issues are not borne out of financial mismanagement entirely - in fact the financial crisis is a symptom of their piss-poor politics - treat the symptom and not the cause and you're stuck with the same issues still. You just prolong them and now it becomes SA's issue - not a very good idea, surely?



Foreign investment is based on perception of political and financial stability within a country. One of my previous positions involved research in this area so while I might not be an expert on the matter, my common sense tells me that adopting a failing economy into ours without rooting out the cause of the issues will result in a withdrawal of foreign investment in SA - it's pretty logical. And this coming at a time when the 1st world economies are already limiting exposure to 3rd world markets due to the financial crisis. Foreign investment is under pressure as it is and the last thing one would want to do is create the perception that we are exposing our own currency to Zimbabwe's politics. Like I've stated already, remove the cause, don't treat the symptom. This isn't the flu that just passes by if you treat the symptoms, this is more like lung cancer, and Bob's exhaling tobacco (how apt an analogy) all over his people.



So beef up the border control. You're talking about the failings of our own government to prevent illegal immigrants entering the country as if this is an accepted norm and we should just look past that point. The illegal immigrant issue is exactly that - illegal. It shouldn't be used as a justification for bailing out Mad Bob and his cronies. However one can't just ignore the fact that it is happening (I assume this would be your argument now), so: how will Zim adopting the rand change this if ZanuPF is still in power? The dollarisation won't change their politics and their lack of a democracy. It is tyrannical dictatorship (one thing I'm sure you can agree on), and therefore how on earth would this be a good thing for SA.

But you still haven't pointed out how this would not dilute our currency - in the end, we're just bearing the brunt for their cock-ups again. Why should you feel the hit in your pocket while Mad Bob continues to exhale cancer all over his people? Do you not see now where the true motivation for this stems from? ANC bailing out a comrade up north - simple as that. It has buggerall to do with helping the people. They have been flooding to SA for years now already in their droves - their economy is already practically kaput - let it take the next step and fail completely and get rid of Mad Bob - then the world can move on with steps like these to address the plight of the people.



As I've posted, foreign investment is not the only risk - I've pointed out numerous risks. Well a risk implies that the downside could or couldn't happen - wrong, it will happen. You mention it would be good for Zim - well Zim isn't our priority - SA is. This mindset of help a brother to your own detriment is disturbing. We should look after SA, first and foremost. Beef up border control and let the country implode. Either that or assassinate Mad Bob at a ZanuPF supporters rally imo. That tyrant needs to be permanently removed from earth very swiftly. Until the day that ZanuPF and their poorly-implemented communist ideologies are removed completely from political influence, there is very little anyone can do for them.

The common them in this post being do not treat the cause, treat the symptom. The financial issues are a symptom of something much bigger - they are not the cause of Zim's plight - would you not agree?

DJK, I'm no financial expert but I completely share your sentiments and logic on this one. It's clear nobody's going to do anything about Bob and even if he dies tomorrow, who says that's going to mean an end to the suffering? I'm sure there are a good (bad) few men eyeing out that future position anyway.

Since our government is clearly incapable/unwilling to be pro-active about the situation in any way whatsoever, then as a reactive measure...

All South Africa should do with Zim is return all the illegal Zimbabweans here to Zim, cut all ties and then properly enforce the border.

Fullstop!

I think that were it a case of Bob and Zanu-PF having been wiped from the face of the planet, many South Africans against this idea would probably be viewing the whole situation in a different light.

 

[rwenzori]

Very interesting debate - thanks guys, and for keeping it civil.

I'm not sure, and I don't understand all the economics much, but there are certain practical issues that one has to face.

1. The govt would never practically succeed at rounding up all the Zims and packing them off home, even if they really wanted to.
2. It would cost a fortune ( maybe more than to "assist" Zim transition to the Rand ) to close the border(s), and would need a large and competent miltary force to do so. It was hard enough, and not entirely successful back in the 80s - I did a camp at Ellisras and our unit was attempting to catch "terr" infiltrators. They could detour through neighbouring countries - that border is LONG!
3. Zim has a large amount of military equipment, and a large army. I seem to recall reading here that Heitman rates their military as pretty strong. Now if you let chaos descend completely, this bloody lot are going to go walkabout, probably into bordering states, and SA would be the most attractive. No matter how tightly you have closed the borders ( at great expense ) you are going to end up with armed bands of marauders in the region - NOT nice.

 

[DJ...]

My issue is that the economy is already near fatal collapse, therefore stands to reason that if we've handled the influx of immigrants so far, the few more likely to pop in doesn't warrant financially bailing out the loon and doing so to the detriment of our own economy...