The Sunday News
WHILE the United States dollar was seen as a blessing to the country after years of hyperinflation, economists have argued that the currency was actually a double- edged sword for Zimbabwe.
According to Lynton-Edwards stockbrokers research analyst Mr Kudzanai Sharara, the US dollar has made pricing, budgeting and transactions quite easy and stabilised inflation.
Mr Sharara said the currency had multiple advantages as long- term economic planning was easier to do under a stable currency and could possibly attract investors who were reluctant to invest in the country due to its economic and monetary weaknesses.
However, he adds, like a double-edged sword, the dollar was also threatening to send some companies into extinction.
“With most currencies across the globe weakening against the US dollar, most Zimbabwean companies will struggle to be competitive in terms of prices. Companies like Delta, which made efforts to recapitalise and use modern equipment to become as efficient as other beverage brewers have been losing their market share in sparkling beverages to South African products such as Twizza because of exchange rate differences.
The South African carbonated drink Twizza is now the favoured cheaper offering for cash-constrained Zimbabweans as a 2-litre bottle retails for $1 against Delta’s Coke which retails for $2,50,” said Mr Sharara.
Delta recorded a reduction in volumes for most of its products for the first quarter ending June.
The market is awash with cheap imported products and coupled with liquidity challenges, many consumers are opting for them, crippling the local industry.
He said it was now cheaper to buy most products from South Africa because of the exchange rate differences thus an influx of imported products as Zimbabwe was using a generally strong currency.
“South Africa is our biggest trading partner and goods in rands become cheaper. Dollarisation from a price perspective will render Zimbabwean products uncompetitive thus threatening the viability of local companies,” Mr Sharara said.
Analysts say the US dollar has achieved its purpose of stabilising the economy but beyond stability there was a need for economic growth which requires a softer currency.
“We cannot manage the dollar when it strengthens against major trading partners,” said an analyst who spoke on condition of anonymity.
Solusi University lecturer and economist Dr Bongani Ngwenya said the major challenge caused by the adoption of foreign currencies like the US dollar was lack of monetary sovereignty.
He said as a country, we have no control over the supply of the dollar thus exacerbating its shortage.
“What is needed is to improve inflows of the dollar into the country. Government must ensure we make the economic environment investment friendly so as to attract foreign direct investment.
“We have to resuscitate our industries and improve the productive sectors and export again so as to generate revenue reserves,” said Dr Ngwenya.
However, Dr Ngwenya said the issue of a softer currency was out of the question especially if it meant returning the Zim dollar as the economic fundamentals on the ground were not suitable yet.
He said no one at this moment could have confidence in the Zim dollar.
“If we adopt a willingness to improve the basic fundamentals and work together to improve revenue inflows, the situation will get better,” Dr Ngwenya said.
