Motlanthe: Zim may adopt rand

[boramk]

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

You're a toss because:

I don't think it would have much impact on South Africa if it were to happen

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.

Please educate me on what long term benefits we are to gain from this other than much more worthless?
Zimbabwe might just start farming again? And even so, how does that benefit us?

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

then

the Rand is already accepted as the main form of currency there anyway

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.

Think of this: SA has R1000. If the government prints more money, lets say another R100, the total is R1100, but because there is more money in the money supply, the value gets diluted, so that the purchasing power of the R1100 is equal to the R1000 before, hence inlfation goes up.
The SA goverment is NOT printing Rands for Zimbabweans so:

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.

There.

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

Of course it's an option, the debate is the consequnces of the 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.

Do I have to quote you again??
You said that we will not be impacted by Zim adopting the Rand, mhy example is a mere indication that even though Mexico does not have hyperinflation etc. The dollar will suffer.

Toss.

 

[DJ...]

Listen joelus - if you want to argue economics, then make an argument within the context of the points raised. It's as simple as that, and I've made the questions appropriately so...

 

[Palmela]

Ever wonder who supplied and supplies the paper and the presses?

A German company which helps Zimbabwe supply its banknotes has become the latest firm to end links amid outrage over the situation in the country.

Giesecke & Devrient said it would stop providing paper for banknotes immediately following a "political and moral assessment" of conditions there.

http://news.bbc.co.uk/2/hi/business/7484838.stm

Giesecke & Devrient supplied currency during the inflation in the Weimar Republic in the 1920s, one of the most prominent cases of hyperinflation. It also printed tickets to the 1936 Olympics in Nazi Germany and did business with Spain under Franco.[3]

In October 2002, Giesecke & Devrient, along with The Information Security Group, Royal Holloway, University of London and Vodafone set up the Smart Card Centre, which is part of the ISG at Royal Holloway.

http://en.wikipedia.org/wiki/Giesecke_&_Devrient

An Austrian company is supplying Zimbabwe's central bank with materials used in the design and printing of the country's virtually worthless money, a South African newspaper reported Thursday.

Despite pressure on European companies to halt dealing with the government of controversial President Robert Mugabe, Vienna-based Jura JSP is supplying the Reserve Bank with licenses and software used in printing banknotes,.....

Company officials confirmed Jura's dealings with the Reserve Bank to The Star and said they would consider revising the relationship if required to do so by the European Union

http://www.monstersandcritics.com/n...ps_Zimbabwe_bank_produce_near-worthless_money



Zimbabwean dollar:
http://www.answers.com/topic/zimbabwean-dollar-2

 

[PeterCH]

Not 100% correct.

If ZIM addopts the Rand it means there is a greater demand for our currency = Higher value. But it can all go very wrong if not handled correctly.

Not true. Zim is bankrupt and in debt. They don't have gold or foreign exchange to exchange for Rands. What we'd in effect be doing is printing more Rand bills and giving them to the Zimbabweans ZANU-PF to finance their retirements.
Rand would depreciate. We'd just add more dead weight.

 

[Sherbang]

Not true. Zim is bankrupt and in debt. They don't have gold or foreign exchange to exchange for Rands. What we'd in effect be doing is printing more Rand bills and giving them to the Zimbabweans ZANU-PF to finance their retirements.
Rand would depreciate. We'd just add more dead weight.

Actually, Zimbabwe is home to the world's second biggest platinum reserves
http://www.miningmx.com/platinum/937715.htm
http://www.fin24.com/articles/default/display_article.aspx?ArticleId=2367658

Not to mention 13 million people hungry for long-denied goods and services...
(A risky investment maybe, but if the currency is stable there is huge opportunity to set up shop!)

Azar Jammine, senior economist at Econometrix, said that adopting the rand would have to come with a dilution of political power. This would be unattractive to both the old leadership and a new government trying to prove itself.
...
Jammine said using the rand in Zimbabwe would not hurt [our] currency. "It should not affect the rand. Zimbabwe is such a small country relative to South Africa and if South Africa had all the control, it would control how many rand it creates."

International ratings agencies Standard & Poor's and Fitch said on Thursday that any adoption by Zimbabwe of the rand would not hurt South Africa's rating.

 

[PeterCH]

Actually, Zimbabwe is home to the world's second biggest platinum reserves
http://www.miningmx.com/platinum/937715.htm
http://www.fin24.com/articles/default/display_article.aspx?ArticleId=2367658

Not to mention 13 million people hungry for long-denied goods and services...
(A risky investment maybe, but if the currency is stable there is huge opportunity to set up shop!)

1. Platinum is not is such big demand atm.
2. This may work if SA gets full control of those platinum reserves and revenue goes straight to our reserve bank and that revenue gets converted to Rands which go to Zimbaweans. But the platinum is sold off first to generate money which then gets given to
the Zim reserve bank. We don't throw money at Zim. That is SUICIDE.

Otherwise it won't work.

SA has 40 million people who are just as starved for goods and services but they can't afford them. A huge population of unemployed and poorly educated people is a liability.

Even 1 extra Rand printed means depreciation of the currency. SA would need to take control of Zim's exports, sanctions would have to be lifted (they won't be yet), buyers should be available to buy Zim's products (there are few now in the financial crisis)
and those funds could be used as cover/tender to print Rands for Zimbaweans.

 

[Sherbang]

Listen joelus - if you want to argue economics, then make an argument within the context of the points raised. It's as simple as that, and I've made the questions appropriately so...

DJK - I don't want to argue economics, I want to have an enjoyable discussion about the implications of dollarisation. Having adolescent insults thrown at me (not by you) does not make for an enjoyable time and makes me reluctant to continue. I'm not interested in proving I'm right and you're wrong or vice versa, I know it's always more complicated than that, but without a level of respect and tolerance for differing ideas and propositions I see no point in coming back here. I'm certainly not going to subject myself willingly to hatred and abuse.

I also think that many people on this forum are lacking in compassion.
One can only hope that should South Africa go down the tubes (however unlikely it may seem) that western countries won't take the attitude of closing their borders to you and telling you to eff off. (Europe did it to the jews in WW2 and who knows how many lives might have been saved if they had opened their borders and hearts)

Regarding dilution of currency, obviously SA would have to carefully control how much money it prints. There is no reason to think they would just print without such management.

Regarding your assertion that:

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.

You may find the opposite. Adopting a 'failing economy' is the first step to saving that economy. Foreign investors may be willing to invest in Zimbabwe for the first time because their currency will be stabilized and the political and financial stability of the whole area will INCREASE due to sound financial management by the SA government - who have actually proven their worth in this dept.

 

[Albereth]

Reserves are still in the ground - they aren't money in the bank.
Money does not equal goods or services. In order for Zim to get rands they would have to provide goods and services, which they don't have.
Right now there is nothing supporting the Zim dollar. Nothing. So what would we be exchanging Rands for? As soon as you give Rands for nothing, you say the value of the Rand is nothing.
Jammine is right - if SA controlled the printing of the Rands it would not be affected by the Zim economy. However, if it printed extra Rands for Zim to use then it wouldn't be controlling the number of Rands - it would have just printed more and the Rand will tank. Seeing as Zim has nothing to offer for the Rands, we won't be printing any for them any time soon.
Standard & Poor didn't understand the question, or the response is given without context.

 

[Sherbang]

1. Platinum is not is such big demand atm.
2. This may work if SA gets full control of those platinum reserves and revenue goes straight to our reserve bank and that revenue gets converted to Rands which go to Zimbaweans. But the platinum is sold off first to generate money which then gets given to
the Zim reserve bank. We don't throw money at Zim. That is SUICIDE.

I think the point of dollarization is that there would no longer be a Zim reserve bank. The revenue would not need to be 'converted to rands' it would all be in rands to begin with. The currency would be completely controlled by SA. The reason it will never happen is because Mugabe would lose an incredible amount of control and power over Zimbabwe. He would never agree to that.

SA has 40 million people who are just as starved for goods and services but they can't afford them. A huge population of unemployed and poorly educated people is a liability.

SA has massive foreign investment. Of course unemployment and education need to be tackled, but it's a big bonus and incentive knowing you can actually spend the money you are earning if you are employed.

 

[Albereth]

I also think that many people on this forum are lacking in compassion.
One can only hope that should South Africa go down the tubes (however unlikely it may seem) that western countries won't take the attitude of closing their borders to you and telling you to eff off. (Europe did it to the jews in WW2 and who knows how many lives might have been saved if they had opened their borders and hearts).

Opening borders and wrecking your economy are two very different things. The fact that the borders were opened without any thought is an issue that we are going to be dealing with for years to come. The better way would have been to take all the refugees and put them in camps where they could get food, water and medication. No, we allowed them in to upset the existing social balance and we saw how the township residents reacted to that.

The crap in Zim isn't South Africa's problem. It is Zim's. that doesn't mean that we can't play a role in helping Zim find a solution but frankly our efforts were a complete and utter waste of time and effort. And if a neighbour continues to mess you around you go in and thump him. And what have the Zimbos done to solve their own problems? Not an awful lot - Ugly Bob should have been shot in the face a long time ago.

 

[PeterCH]

SA has massive foreign investment. Of course unemployment and education need to be tackled, but it's a big bonus and incentive knowing you can actually spend the money you are earning if you are employed.

SA has 40 million South African 'Zimbaweans' ie the people you earlier said were an economic advantage. We can't care for our own population, let alone now bring in 13 million uneducated, unemployed people? No--sorry.

Secondly if the sanctions were lifted and ZIM exports and services could be
converted into currency then there would be cover. However, exchanging Zim Dollar notes for SA Rand notes will depreciate the Rand, unless we can do so without printing more money - ie have the government just donate x Billion Rand to Zimbaweans. It would still be problematic as that money would no
longer be spent in SA and our economy would suffer. It would be akin to an
efflux of funds abroad.

 

[TheHiveMind]

You realize if we do this, we are rewarding Mugabe. What kind of message does that send? ^_~ Shoot him in the head, until that is done, this is not up for discussion.

"(Europe did it to the jews in WW2 and who knows how many lives might have been saved if they had opened their borders and hearts)."

Europe got owned.. except for britain, who did let alot of jews in.

 

[Albereth]

The revenue would not need to be 'converted to rands' it would all be in rands to begin with.

How does that happen? How does the Zim money turn into Rands?

 

[Sherbang]

Reserves are still in the ground - they aren't money in the bank.

Reserves are currently being mined and proving to be lucrative.
Zimbabwe Platinum Mines, Mimosa Platinum Mines and Impala Platinum are all mining. Anglo Platinum is developing a new mine in the Midlands, Unki.
Rio Tinto is active in diamond mining in the country, Zimasco Consolidated Enterprises owns the country's largest ferrochrome producer.
http://www.platinum.matthey.com/production/116773998114006.html

We can also note that Zimbabwe is the biggest trading partner of South Africa on the continent. To think we won't be effected economically if we just sit back and let their economy collapse is to ignore how intimately our economies related.

Money does not equal goods or services. In order for Zim to get rands they would have to provide goods and services, which they don't have.
[/QUOTES]
Opportunity knocks.
Investment does equal goods, services and employment.
Nobody is now likely to invest in the Zim dollar, but if they had a relatively strong stable currency investment is far more likely.

Standard & Poor didn't understand the question, or the response is given without context.

Possibly, judging by the state of the worlds economy they may not understand economics at all!

 

[Sherbang]

The crap in Zim isn't South Africa's problem. It is Zim's.

I only wish that were true. Unfortunately their problem is our problem - no nation is an island!

 

[Albereth]

Reserves are currently being mined and proving to be lucrative.

Possibly, judging by the state of the worlds economy they may not understand economics at all!

LOL.

But your link is about the state of play in Zim in 2006. Quite a bit has changed since then.

 

[Albereth]

I only wish that were true. Unfortunately their problem is our problem - no nation is an island!

It is true. We have stated it to be true. We said only quite diplomacy would work.

If we cut Zim off right now it would have very little impact on our economy. We do far more trade with non-African countries.

 

[Sherbang]

It is true. We have stated it to be true. We said only quite diplomacy would work.

If we cut Zim off right now it would have very little impact on our economy. We do far more trade with non-African countries.

It would not stop refugees, illegal immigrants, cholera and other diseases.
These are humanitarian issues but it will impact on our economy in a big way.

 

[Sherbang]

LOL.

But your link is about the state of play in Zim in 2006. Quite a bit has changed since then.

Possibly, but the mines are there, the labour is there, the mining infrastructure is there, the platinum, gold and diamonds are there. The assests exist.

How does that happen? How does the Zim money turn into Rands?

Not sure- salaries and wages will be paid in Rands by companies that are operating in Zim (yes - they do exist). All current US and Zim dollars will be exchanged for Rands. Investment will be in Rands.
I'm not sure how it would work...

 

[Albereth]

Possibly, but the mines are there, the labour is there, the mining infrastructure is there, the platinum, gold and diamonds are there. The assests exist.


Not sure- salaries and wages will be paid in Rands by companies that are operating in Zim (yes - they do exist). All current US and Zim dollars will be exchanged for Rands. Investment will be in Rands.
I'm not sure how it would work...

Reserves are unmined ore sitting in the ground. Extraction and processing takes money. The 'value' of reserves does not take cost of production into account.

I'll have to argue the rest later - got a meeting to go to