Impact of the Multi-Currency System on the Manufacturing Sector in Zimbabwe

Abstract

The introduction of the multi-currency system in February 2009, in which a number of foreign
currencies were adopted for use as legal tender, was meant to rein in devastating
hyperinflation that had beset the Zimbabwean economy since 2000. The purpose of this study
was to determine the impact of the multi-currency system on the manufacturing firms in
Zimbabwe. The study used a quantitative approach and a questionnaire was used to collect
data from 50 respondents out of a sample of 100 from 25 manufacturing firms. This sample
was conveniently selected. The response rate of 50%, was adequate to give the desired study
results. The study found a number of major benefits from the multi-currency system to the
manufacturing sector. These included the stabilisation of prices, elimination of hyperinflation
and fall of interest rates. Consequently, the firms were able to properly plan and budget for
their operations. Other benefits included improved availability of raw materials, ability to
increase capacity utilisation and increase in sales and profitability. The sector preferred the
continued use of the multi-currency system, particularly the United States dollar, to the re
introduction of the Zimbabwean dollar. The study recommends that the government of
Zimbabwe should continuously reassure the nation that the multi-currency system will not be
removed too soon. The manufacturing sector should also engage government to encourage
foreign direct investment (FDI) in order to improve liquidity, which is critical for the sector’s
survival.