(HERALD) Government to address cross-rate problems through policy

Government to address cross-rate problems through policy
Tuesday, 26 July 2011 20:44 Top Stories

THE Government would soon come up with a policy to control the issue of cross rate between the United States dollar and the South African rand, which has been blamed for price distortions and erosion of salaries especially for people in Bulawayo and its surroundings.

Presenting the Mid-Term Fiscal Policy Review Statement yesterday in Parliament, Finance Minister Mr Tendai Biti said the cross rate issue was problematic and announced that Government would take sterner measures to control it.

“It is sad to note that there are unscrupulous traders who are exploiting the public over the exchange rate involving the US$ and the South African rand,” said Minister Biti.

“Cross-rate rate has become problematic. However, the Government is putting measures to control the issue and with effect from 1 September 2011, all the traders would be required to display their exchange rate figures clearly. We will also expect everyone to stick to the official rate.”

Minister Biti said the multiple currency system would remain in use as indicated in the recent Mid-Term Policy document. He said his ministry would soon present a document to the Cabinet for discussion regarding the issue of whether or not the country should join the Rand Monetary Union. Minister Biti said the Government was still engaging the United States government to have smaller denominations.

At the moment the smallest denomination used in the country is the US$1. Bulawayo residents who are among the worst affected by cross-rating, have on several occasions called on the Government to introduce a single currency system to avoid cross-rating. The problem comes against the background of the rand firming against the greenback. At the moment the exchange rate for the US dollar to the rand stands at around 1:7.

The residents have complained that cross-rating was eroding their salaries, which weakened their buying power. While most workers in the country are paid in US dollars, a majority of shops peg prices of their goods and services in rand. Commuter omnibuses also charge their services in rand while some landlords demand rentals in rand. At the introduction of the multiple currency system in March 2009, the rate was US$1:R10. It later on changed to 1:9, 1:8 and is now 1:7.

Illegal foreign currency dealing became a lucrative business during the 2007-8 hyperinflationary periods with foreign currency dealers popularly known as osiphatheleni occupying every street corner to cash in on desperate residents. The group was once known for driving flashy cars, eating from expensive restaurants and spending lavishly as they were literally running the economy and dictated the exchange rate.

The business, however, suffered a knock following the dollarisation of the economy, which stopped the transactions in Zimbabwean dollars. Most of the dealers were relegated to selling cell phone recharge cards, chicken feet and gizzards while some were forced to dispose of their fancy cars. However, the group is back on the streets of Bulawayo after diversifying their trade and some have resumed their flamboyant lifestyles. A number of them have become go-betweens in deals involving diamonds, gold and the procurement of passports and other important documents.-Chronicle.