Zimbabwe is seriously considering using the rand as its official currency, newly appointed finance minister Mthuli Ncube has said.
Ncube, a former dean of the Wits University Business School and deputy president and chief economist of the African Development Bank, said that Zimbabwe had only three viable options to get out of the cash crunch it was facing.
Ncube’s major challenge is to stabilise the economy that has recently been hit by acute shortages of cash and basic commodities and skyrocketing prices, as well as a perennial foreign currency crunch.
He told Zimbabwe’s state media at the weekend that adopting the rand was a possible alternative in his bid to salvage the staggering economy.
"I am very clear that there have to be currency reforms and the [current] currency approach is not working," he said. "In doing so, there are three choices that I will explore and pursue with urgency. One is to adopt the US dollar only and remove the bond notes from circulation through a demonetisation process, and also liberalise exchange controls.
"Two, adopt the rand by negotiating to join the rand monetary area, and this will close the gap in loss of competitiveness against our largest trading partner, South Africa."
Ncube said the third option was to adopt a new Zimbabwean dollar. "Here one needs to be clear that it has to be backed by adequate foreign reserves and macroeconomic conditions for its stability."
Ncube said that foreign currency accounts would also be introduced into the system.
Zimbabwe is using a basket of currencies including the US dollar, the British pound, the Japanese yen, the rand and all regional currencies.
It also uses surrogate notes called bond notes, officially regarded as being at par with the US dollar.
In a paper published before his appointment, Ncube wrote that he was a strong advocate for the rand.
"I was one of the people who were of the idea that Zimbabwe should adopt the rand and join the rand monetary union for a seven-to 10-year period. This is because South Africa accounts for 80% of Zimbabwe’s trade.
"So, clearly, you want a currency that is linked to your largest trading partner."
Ncube’s appointment in the post-Mugabe cabinet was largely welcomed inside and outside Zimbabwe, with opposition leader Nelson Chamisa calling him "a good man who was joining a bad team".
"He is a good man, but being put into a basket of bad eggs will result in him turning bad as well," said Chamisa.
UK-based Zimbabwe academic Alex Magaisa said his success would depend on how much room he got to implement his policies in the Zanu-PF government, known for its self-defeating programmes.
"However, much will depend on the latitude [President Emmerson] Mnangagwa is willing to give him. Past finance ministers have failed to achieve their objectives not because they were bad but because there was … political interference and toxic policies based on populism."