Harare - Zimbabweans have a new economic headache, the rand, which fell to a record low against the dollar on Friday.
Apart from putting up with cash shortages, worsening unemployment, rising taxes for imported goods and prolonged blackouts of up to eight hours a day, Zimbabweans are now rejecting the rand.
Zimbabwean Finance Minister Patrick Chinamasa has cut Zimbabwe’s economic growth for this year to 1.5 percent, blaming reduced productivity and the effects of lower commodity prices.
The rand has declined in value for the past few months, with NKC African Economic saying that it “is in a precarious situation” just like all the other emerging currencies.
In Zambia, the kwacha has been weaker, although Vedanta Resources said a weaker local currency had helped boost its copper-producing unit there.
But for Zimbabweans, a weaker rand is causing purchasing power problems and retailers are the hardest hit as they have to adjust their exchange rates daily.
Zimbabwe currently uses a multiple currency basket including other legal tenders such as the Botswana pula and the Japanese yen among others.
“We have seen an upsurge of certain retailers refusing to accept the South African rand coin,” Confederation of Zimbabwe Retailers president Denford Mutashu said on Friday.
Change in rand coins has become problematic, with Zimbabweans generally rejecting the currency.
However, other traders told Business Report that there was need to correct the exchange rate for the rand as erratic exchange rates were leading to scepticism within the market over its real value.
Zimbabwean economist John Robertson told Business Report that rand notes were not a problem as “a very large number of families in Zimbabwe are dependent on income from relatives settled in or trading in South Africa” while those who sent money through banking channels always had money converted to the US dollar.
“It (the falling rand) is slowing things down in the economy. The rand is acceptable in the country and you can use it; it’s the coins that are a problem,” Robertson said.
Zimbabwe this year introduced bond coins, local coins hedged by a bond held with the Reserve Bank of Zimbabwe to ease problems associated with smaller denominated change.
The bond coins were first met with scepticism in the market, with Zimbabweans rejecting them, fearful that the government was readying reintroduction of the Zimbabwe dollar, which it abandoned in 2009.
Mutashu said the weaker rand had had a “significant impact especially on the consumers and the retail sector”.
However, there was nothing that the reserve bank could do in light of the declining rand as Zimbabwe had no currency of its own, analysts said.
“The challenge that we have is that no one wants to bear the exchange rate cost and at the same time we don’t expect the Reserve Bank of Zimbabwe to do much because this is not our currency,” Mutashu said.
Zimbabwe central bank governor John Mangudya was quoted by state media this week saying: “What has been happening with the rand coins is only natural because the value of the rand has been falling, therefore businesses do not want to incur exchange rate loses. At the same time no one also wants to incur exchange rate losses so it’s no one’s fault really.”
Other economists said smaller value coins were important for an economy in addressing pricing levels although Zimbabwean retailers have been lowering down prices, with a 500ml bottle of water falling to about 30c compared with 50c in the past two years.
The Consumer Council of Zimbabwe said in a survey released on Thursday that “the cost of living as measured by the Consumer Council of Zimbabwe’s low-income urban earner monthly basket for a family of six increased from the end of September 2015 figure of $559.11 to $561.92” by the end of last month.
This showed a marginal increase of $2.81 or 0.5 percent over the previous year.
Shop attendants surveyed by Business Report in Harare said consumers were responding to price cuts by retailers.