Walter Muchinguri Assistant Business Editor
Zimbabwe should seriously consider the use of the Yuan for payments in transactions involving China, economic analysts have said. The Yuan is one of currencies in the multi-currency basket adopted by Zimbabwe that also has the Botswana Pula, British Pound Sterling, Euro, South African Rand, United States Dollar, the Australian Dollar, Indian Rupee and Japanese Yen but Zimbabweans are yet to warm up to its use.
The analysts said that there was no reason why Zimbabweans were shying away from using the Yuan since it was a very stable currency which is increasingly being used for payments between global and Chinese companies in Europe, the United States and other regions.
Within the region, South Africa, Zimbabwe’s trading partner, has been increasing the use of the Yuan since 2012 when it took a deliberate policy to adopt the use of the Yuan to hedge against fluctuation in its currency.
According to data released by the Society for Worldwide Interbank Financial Telecommunication, the number of renminbi (Yuan) payments in South Africa rose by 33 percent in the last 12 months and by 191 percent in the last two years.
In June 2015, about a third of direct payments made between South Africa and China and Hong Kong were in renminbi, compared to only 11 percent a year ago.
In June, the renminbi was the fifth most active currency for global payments after the US dollar, the euro, the pound and the Japanese yen, according to Swift.
“If countries such as the US and South Africa are comfortable with using the Yuan then what are we afraid of,” said one analyst.
The analysts said that it made sense to start initiating payments in the Yuan given that the country has already adopted the Look East policy that has seen China funding major projects in energy, roads, national railway networks, telecommunication, agriculture and tourism after mega deals were concluded during President Mugabe’s visit to China last year.
China is also the biggest importer of tobacco in the country and has also been a consumer of the country’s minerals such as chrome.
Economist Dr Gift Mugano said the Government had done its part in including the Yuan in the currency basket and the ball was now in the court of the private sector.
“It is now up to the business sector to take the initiative to action the use of the Yuan through an invoice. Yes Government can go further to sign a bilateral agreement formalising the use of the Yuan but for now what it has done is sufficient. The private sector just needs to graduate from their silo mentality and start working with Government rather than shying from it.
“If we start using the Yuan the Chinese will be encouraged to do more than what they are doing now because an increase in the use of the Yuan internationally helps them to increase their credit rating,” he said.
Dr Mugano said that the local business community should emulate their South African counterparts when it comes to doing business with China.
“Whenever South African president Jacob Zuma goes to China, South African businesses charter planes to follow and support him. He does not go there on his own but with most of his business executives,” he said.
Dr Mugano said that the use of the Yuan for payments will also help as a tool for sanction busting as transactions will now be routed via Hong Kong as opposed to the US where several local companies have had their money intercepted by the US Office of Foreign Assets Control.
Companies that have fallen victim to OFAC include Olivine industries, the Industrial Development Corporation and the Minerals Marketing Corporation of Zimbabwe.
Another economist Mr Brains Muchemwa said the world over the reason why all payments or trade are increasing in Yuan is specifically an accountable fact that the trade between the respective countries and China has been increasing.
“The other reason why countries now have confidence using the Yuan and the reason for them to use it is the account of the fact that for the past 15 years the Yuan has exhibited a very stable trend such that it can only be attributed to reserve currencies and on account of that it has managed to gain a lot of confidence in most of the trade forums globally,” he said.