Zimbabwe has taken its first steps towards making the South African rand the underpin of its efforts at economic recovery.

On Monday the country's ministry of economic planning and investment promotion announced a comprehensive policy aimed at attracting foreign investment to the country.

Various currency regulations prevailing during the Mugabe regime have been dispensed with.

Zimbabwean companies need more than $1bn (about R10bn) over the next 10 years. "We are appealing to South African companies to provide these businesses with credit," says the announcement.

Zimbabwe will repay these loans out of its export yields from cotton, tobacco, agricultural produce, gold and platinum, as well as its earnings from tourism. "The government has decided that [Zimbabwe's] reference currency should be the rand," continues the statement. This coincides with Monday's Special Summit of the Southern African Development Community (SADC) in Mbabane, Swaziland.

"This means that financial records in Zimbabwe will in future be indicated in rand," commented a source in Mbabane.

The Zimbabwean economic plan announced in Harare to coincide with the SADC summit provides wide-ranging preferential incentives for the South African private sector to invest in Zimbabwe.

Bilateral agreements - already negotiated - that will welcome South African investors will soon be signed.

Other than using the rand as the reference currency, the Zimbabwean budget will in future be a "cash budget" - one in which money spent by the state will depend on taxes and donations.

No money will be printed. This was the biggest reason for the growth of money supply and the soaring inflation.

Local banks may make advances to clients in foreign currency.

Foreign currency may be retained by those holding it, and will not, as previously required, have to be sold to the Zimbabwe Reserve Bank.

According to the statement, exporters will henceforth retain their full earnings.

The Zimbabwean government also guarantees an immediate cessation of farm seizures, because these send out the wrong signals.

"Farmers' investments in their farms will in future be able to proceed without hindrance. Zimbabwe will be a law-abiding country that respects property rights."--fin24