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Will Zimbabwe Introduce Chinese Yuan?

A pack of bills of Chinese yuan next to the U.S. currency
Finance Minister Patrick Chinamasa reassures the market that Zimbabwe will continue using the multiple-currency system, saying more currencies will be introduced if conditions permit.

Presenting the 2014 national budget in Harare on Thursday, Chinamasa said he decided to reassure the market against a background of speculation and reports that Zimbabwe will re-introduce the local currency.

“This is against a background of speculation and reports to the contrary, which are clearly unfounded, and can only be motivated by intentions to undermine confidence in our economy. This position, I must add, is anchored in our Zimbabwe Agenda for Sustainable Socio-Economic Transformation (ZimAsset) blueprint, and as a matter of fact, depending on size or volume of trade flows, I would be persuaded to introduce other foreign currencies to the cocktail of multi-currency regime currencies, if conditions warrant.

“Hence, consistent with pronouncements in ZimAsset, let me categorically re-state that the economy will continue using the multiple currency regime,” he said.

His remarks have attracted a lot of attention in the social media sphere with many people speculating that the Zanu-PF government will soon introduce the Chinese Yuan in the country.

Chinamasa added that policy consistency, credibility, certainty and transparency are critical building blocks for confidence building.

On Zimbabwe’s black economic empowerment programme feared by external investors, the minister said the challenge faced by the country’s scheme relates to perceptions as well as elements related to interpretations over the application of the indigenisation policy.

“A lot of clarifications are being sought by would be investors on our Indigenization and Economic Empowerment laws and regulations. As policy makers we have not also be speaking with one voice on this issue, a development that has tended to create and add to the confusion. Confusion on over the Indigenization and Economic Empowerment programme seems to be emanating from the process rather than the law

He said the programme will be conducted in phases under a sector specific approach guided by resource based investments and other investments.

“In the case of resource based investments, our contribution is the depleting asset in the form of the in-situ value of the mineral which will be our contribution to the 51% of the business. The investor who comes with capital, technology and managerial skills to exploit this depleting resource is entitled to 49% of the shareholding.

“With respect to the other sectors of the economy, the 51/49% share structure still applies. However, what needs to be clarified in this connection is that the 51% stake for Zimbabweans is not available for free where the enterprise does not benefit from a natural resource or raw material derived from Zimbabwe.

In the same vein, he said, where the enterprise does not benefit from a natural resource or raw material derived from Zimbabwe, the business partners in the investment are free to make their own decisions on how and when, within the gazetted framework, the 51% contribution is to be financed or achieved.
He added that government does not expect this to happen overnight, but expects it to be a process which should ultimately lead to conformity with the law.

“It should also be clarified and understood the investor has a privilege of choosing his/her Zimbabwean partner. Only where this arrangement has failed would government assist. Both local and Foreign Direct Investment is most welcome, and vigorously promoted,” he said.