Nigel Chanakira, a renowned businessman and economist, has said the acceptance of the new currency, ZiG, will be difficult given that the market still prefers the greenback.
He was speaking at a post-2024 Monetary Policy and Outlook Conference on Tuesday which was hosted by NewsDay’s sister paper Zimbabwe Independent.
Reserve Bank of Zimbabwe (RBZ) Governor John Mushayavanhu launched ZiG on Friday last week scrapping the Zimbabwe Dollar after the latter had depreciated by more than 70% since January this year.
As reported by NewsDay, Chanakira asked the conference attendees who were close to 200 to show by raising of hands, which currency they preferred between the US dollar and ZiG. All of them chose the US dollar.
The “survey” raised doubts about ZiG’s longevity and revealed a significant divide between the monetary authorities and the market, as observed by Chanakira. He said:
I am not sure we are there yet in terms of anchoring our new currency in a context where you can trust it, and believe it…
We need to get back to basics. What is the role of a currency in an economy? How do we produce goods and services and how do we measure the volume of those goods and services and compete in a global economy?
According to Brains Muchemwa, the chief executive officer of Oxlink Capital, the government’s decision not to require all taxes to be paid in ZiG indicates a lack of interest in the local currency. Said Muchemwa:
The government has no interest whatsoever in the local currency and I think the conversations in the monetary policy should really be between the RBZ and the Ministry of Finance. Those are the two people that should be having these conferences.
The RBZ on this side and Treasury on that side and the RBZ trying to convince the Ministry of Finance that guys you can’t be asking us to issue a currency that you do not want to support.
The currency is not supported by the central bank as many people would think, that’s not the case and that’s why for many years everything that they have tried has failed because the currency is supported by its issuer and in this instance, its issuer is the government of Zimbabwe.
Muchemwa added that the government should impose value-added tax (VAT) and PAYE tax exclusively in ZiG, demonstrating confidence in the currency.
Employers’ Confederation of Zimbabwe economist Misheck Ugaro had this to say:
Business was hoping that we would get an MPS which can now set us in a direction which can localise our costs.
The biggest problem we have in business is that our cost base is US$-based and that makes us very uncompetitive so we were looking for a Monetary Policy Statement position that can fit the localisation of those costs.
So, we are for localisation from US$ to local currency. As to whether the ZiG is the answer, is another question, the jury is out but the spirit is acceptable.
I can say that in the Tripartite Negotiating Forum (TNF) two of the positions that had been put forward are manifesting in this policy the first one being government must tax in local currency.
Ugaro asserted that the business community expressed dissatisfaction because the taxes to be paid in ZiG were only partial, rather than the full 100%.
ZiG represents Zimbabwe’s sixth attempt to establish a functional local currency. This new currency is backed by 2,522 kilograms of gold and approximately $100 million in foreign currency reserves held by the central bank.
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