Dollar vs Rand

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By Emma Kakololo WINDHOEK Since the adoption of the Namibian dollar in 1993, the South African (SA) rand still remains legal tender in Namibia, with the dollar linked to the rand allowing the two to be exchanged on a one-to-one basis locally. However when the rand is exchanged in Namibia, it retains its value, whereas the dollar depreciates in value when exchanged in SA. For N$10 in SA one gets R7.50, about 25 percent less. This commission or transaction fee is also not standard and changes from bank to bank as well as areas in SA. For example, some SA international airways might give you R10 for N$10 while a bank in Cape Town or Johannesburg will give you R7.50 in return for N$10. This is minus N$2.50. According to Ipumbu Shiimi, Head of the Research Department at the Bank of Namibia (BON), this commission (transaction fee) is charged because the Namibia dollar is not a legal tender in that country and that its status in SA is the same as other foreign currencies, for example, the Zim dollar and the pound. “However the rand is not viewed in Namibia the same way because by law in Namibia the rand is a legal tender and that’s why you are not charged a commission when converting your Nam dollars into rands in Namibia,” he explained. He said the decision to link the Namibian currency to SA’s was fitting considering the strong trading ties existing between the two countries. “Usually when a country decides to link its currency to another, it chooses the country with which it has strong trading ties and that was the basis for us to link the Namibia dollar to the rand. For example, about 80% of Namibia’s imports come from SA and a significant number of exports go to that country,” he stressed. He said for now, the dollar could not go solo as benefits reaped from the current arrangement are multiple. Benefits include importing low inflation from SA, removal of exchange rate uncertainty for investors in both countries (that’s why most of our foreign direct investment comes from SA), access to SA financial markets, to finance investments in Namibia, he said.