The Common Monetary Area (CMA) is a setup where Namibia, Swaziland and Lesotho all have their currencies pegged to the South African Rand (ZAR). What this means is that the countries maintain their currencies, but the exchange rate to the rand is 1:1. One is able to use the ZAR in these countries as a means of exchange.

Recently there has been talk of Zimbabwe being included in the CMA set up. The issue is: are both Zimbabwe and South Africa ready for this, and what would be the impact of this?

This arrangement would not make much difference for the Zimbabweans as the majority of the population is using the USD and ZAR as the economy has become more and more ‘dollarized’. What is likely to be of most concern is if this will mean that Zimbabwe will now have to follow South African monetary policies. With a country whose economy has been decimated, high interest rates and runaway inflation, how easy would it be to implement South African monetary policy to restore sanity in the Zimbabwean economy? All the other countries in the CMA do not necessarily follow the South African monetary policy, but their policies are closely aligned to those of South Africa.
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So the woes of the rand continue. This is one currency which you can never predict. From ‘lows’ of 9.30 to the greenback a week ago to the ‘highs’ of 10.13 on Tuesday. So the question is…what is causing all this volatility?

This volatility can be attributed to a number of factors. There are three main issues in my opinion:

The first issue is the worsening recession fears. The flight of capital which was experienced when the recession fears became real last year has continued, albeit at a slower pace. The rally on the JSE experienced in the earlier part of the year has somehow come to an abrupt end. This has put some pressure on the rand of late.
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