The governments in Pretoria and Harare have remained close through thick and thin. This is despite having different economies that vary in size.
This week South Africa hosted the Zimbabwe Investment Summit which took place at the Radisson hotel in Kempton Park on Thursday and Friday. The two-day economic drive was meant to highlight economic opportunities that exist between the two neighbouring countries. Opening the summit held under the theme: Diversify and thrive: exploring investment Opportunities in Zimbabwe on Thursday, Zimbabwe’s Minister of Finance, Economic Development and investment promotion, Professor Mthuli Ncube indicated that his country is open for business after the country adopted a new currency, ZiG backed by the gold reserves. He said the country wants to make the currency fully convertible and functional as it continues to circulate in the country’s economy with other currencies. (IOL)
Zimbabwe’s decision to switch to gold needs to be closely watched by everyone in South Africa. The question everyone should be asking is: Does Harare know what they are doing? Because politically since 2017 no one (in the Zimbabwean government) knows what they are doing. Harare is desperate to improve its financial situation. Zimbabwean President Emmerson Mnangagwa has to introduce some serious fiscal as well as political and constitutional reform to have sanctions lifted. But Mnangagwa best known for his nickname “the Crocodile” is not all that keen on introducing reforms that could see him being phased out of power. A crocodile can never truly be trust especially when it relies on brute force. Mnangagwa desperately needs the support of his people to prop up his regime. That’s where ZiG comes in.
“This is a structured currency which is a way of pegging a specific currency with a currency basket backed by a bundle, and is generally given to a currency when you want the level of the exchange rate is determined by the market… assets. The new currency is circulating with other currencies in Zimbabwe… at launch, the reserve asset holdings were a total of 285 and currency circulation was equivalent to 90 million US dollars which means we had more than three times the amount of the reserves that are required,” he said. Day two of the Summit took place at the same venue with throngs of guests, including academics, government representatives, and business representatives taking part in various discussions on how to strengthen economic relations between the two countries.
Even if the Reserve Bank of Zimbabwe and the country’s government gets this currency up and running, they still need to have sanctions lifted to create jobs. Curbing the effects of inflation is a priority with this new currency, but limiting inflation can only come when sanctions are lifted and Zimbabweans can trade legally abroad. Another matter South Africa needs to be weary of is the illicit trade and smuggling in gold out of Zimbabwe. It is said these crimes take place at the highest levels of government in Harare and include Mnangagwa’s own family. Mnangagwa is not without being crafty, it is how he came to power. It is South Africa that needs to be weary of him.
Keep your friends close, keep your rivals closer.
Zimbabwe is considered to hold Africa’s largest reserve of Lithium – a reported one fifth – while China is the biggest consumer of the mineral, as the leading manufacturer of new energy sources in the form of batteries for solar energy, electronics and electric vehicles. China accounts globally for 80% + of solar cell exports, 50% + of lithium-ion batteries and 20% of EVs according to statistics, making these three the most important pillars of the Chinese economy today. According to You Xiaoying writing on China Dialogue, “new three” – or xin san yang – speaks directly to China’s “old three” that were once the pillars of its exports: clothing, home appliances and furniture.(Zimbabwe)
Zimbabwe is rich in minerals that make it an attractive treasure trove for economic powerhouses. However much of that mineral wealth lies under valuable agricultural land. Its one of the main reasons why the Zimbabwean government under then president Robert Mugabe (Mnangagwa’s predecessor) carried out the land seizures. These minerals such as lithium can be found in the batteries, Electric Vehicles and solar cell exports that China is manufacturing. However, Zimbabwe too could have done the same if its economy and politics were in the right hands. However, Mnangagwa is not interested in introducing deeper reforms. As an Authoritarian he is only interested in strengthening his power. But he needs South Africa to send his country’s exports via the sea. Only time will tell how this plays out.
Article written by:
Yacoob Cassim
Journalist at Radio Al Ansaar
