The revival of the Zim dollar could see history repeat itself

In a surprise turn of events, the Zimbabwe government, last week announced the end of its multi-currency regime after 10 years.

In this edition of Business Day Spotlight, we focus on what this move means for the southern African state and possible effects on the region.

Our host Mudiwa Gavaza is joined by Tara O’Connor, founder and executive director of Africa Risk Consulting (ARC) - a firm that advises on pre-investment and expansion strategies for countries like Algeria, Angola, Congo-DRC, Nigeria, East Africa, the Franc Zone (as a region), South Africa, Zambia and Zimbabwe amongst others.

According to the Reserve Bank of Zimbabwe and finance ministry, the Zimbabwe Dollar is now legal tender. Zimbabweans can no longer trade in US dollars, SA Rand, British Pound or Botswana as they have done in the past.

Many questions still remain about what this will mean for foreign investment, confidence in the currency and saving of ordinary people on the ground.

The decision comes as the country’s inflation rate reached as much as 95% month to month said O’Connor. She said this was a move in the wrong direction for the country headed by President Emmerson Mnangagwa.

“History is our best teacher,” she referring to the hyperinflation and economic turmoil experienced in that country over the last two decades.

Zimbabwe’s issues should be the concern of the region as a whole, particularly SA, O’Connor said. A net importer for a number of years, SA is Zimbabwe’s largest trading parter. The country is said to owe embattled power utility Eskom over R300 million for electricity previously supplied.

O’Connor says leaders in the region like President Ramaphosa may have to take on the role exhibited by former-President Mbeki in 2009, who helped to bring about a government of national unity with the opposition MDC party, which led to 5 years of economic growth before Zanu PF took back the reigns in 2013.

Listen in to hear thoughts around these and other questions.