To join or not to join BRICS, Zim needs to promote, strengthen ZiG
ECONOMIC analysts have expressed different views on whether or not Zimbabwe should join the BRICS economic bloc following current macro-economic stability ushered in by the country’s recent launch of the new currency, the ZiG.
In April this year, the Reserve Bank of Zimbabwe (RBZ) introduced a new domestic currency that is backed by gold, other precious minerals and the United States dollars as part of a broader scope to tame exchange rate volatility, curtail inflation and restore macro-economic stability.
The ZiG replaced the volatile and inflation-weary Zimbabwe dollar, which had marked the reintroduction of a domestic unit of account in February 2019 following a 10-year hiatus, also occasioned by high inflation.
As part of strategic efforts by Zimbabwe to strengthen its economic ties and expand its global influence, President Mnangagwa has held talks with Russian President Vladimir Putin, with a focus on Zimbabwe’s interest to join BRICS.
Zimbabwe, which is being driven by President Mnangagwa’s vision that the country is “Friend to all and an enemy to none” has also announced plans to re-join the Commonwealth that the country exited during the First Republic era and is courting relations with many countries and economic blocs.
The BRICS, which was founded by Brazil, Russia, India and China in 2009 before South Africa joined a year later — is a bloc of major emerging and influential economies that have joined forces to advance their interests and influence on the global stage.
The economic bloc is expanding fast and building a new economic order to challenge the dominance of the US dollar, consequently creating multiple lines of credit away from the Bretton Woods institutions.
By joining the BRICS and any other economic blocs, Zimbabwe believes this would see herself unlocking access to new markets, investment opportunities and technological cooperation.
The southern African nation has for close to two decades been reeling under economic turmoil following the imposition of sanctions by Britain and her allies when Zimbabwe embarked on hugely successful Land Reform programme in 2000 to address the disparities that existed during the colonial era.
Economic analyst, George Nhepera, said while there is nothing wrong in thinking about joining BRICS in future on the basis of currency stability, so far, the country should focus more on achieving success on the convertibility and acceptability of the currency in the domestic market.
So far, there are reports that some businesses continue to flout Government regulations by trading exclusively in foreign currency while giving flimsy excuses as cover for refusing to transact in ZiG.
Authorities have maintained a multicurrency system which is in place up to 2030 and businesses are obliged to trade in various currencies including the local unit.
Nhepera said of late, the BRICS has become more of a geo-political bloc with more of Eastern countries and very little of international capital that members can benefit, therefore Zimbabwe needs more alliances with economic blocs.
“What we need in our country is more alliances with economic blocs from the West such as the European Union, countries such as the United Kingdom and United States of America since our main deficiency is the flow of international capital into our economy.
“There should be financial sector reforms targeted at making ZiG, a currency of first choice in lending business in the medium to long term period. As we speak, right now, our banks are yet to structure long-term finance such as mortgage financing using ZiG as the anchor currency. This is in addition to being used to purchase fuel and accepted by many for rental payments in the residential communities. This is the future we want to achieve as a country before we start thinking about joining BRICS.”
Nhepera said there is an economic and investment reality that countries with excess funds for investment are largely found in western countries while those in demand of the same are in eastern countries and thus Zimbabwe cannot, for now or in future change the status quo.
Egypt, Ethiopia, Iran, Saudi Arabia and the United Arab Emirates have already been invited to join BRICS. Contacted for his views, another economic commentator, Eddie Cross said: “I’m not sure if BRICS is looking for new members.
“I do not really think that it (currency stability) has much significance for Zimbabwe anyway and I’m also not sure what it means for us, but I do not think the currency issue has any real role to play. And I do not think that will be a major issue as far as we are concerned — we are a very small country with a tiny GDP while that for the BRICS is enormous. BRICS has two of the largest economies in the world in it and I think we are insignificant in that respect.”
President Mnangagwa has said the BRICS provides Zimbabwe with an ideal home of like-minded nations, especially of the South.
In a separate interview, the Zimbabwe National Chamber of Commerce (ZNCC) past president, Trust Chikohora, said it is imperative that the country pushes for joining of the BRICS taking into account that the country was not getting support from multilateral institutions such as the International Monetary Fund and World Bank.
“I think Zimbabwe should push to join BRICS and deal with whatever requirements the bloc may have.”
In a situation where we are getting no support from the IMF and World Bank and the West in general, it is imperative that we join the BRICS,” he said.-ebusinessweekly
