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.