What's the deal with Namibia's Currency?

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When I first moved to Namibia, everyone was using the South African Rand. It was particularly strange to me, as I moved to Namibia from South Africa. It was strange because before I found out that Namibia used the South African Rand, I assummed they would have their own currency, just like Botswana or the UK. A few years after moving there it was annnounced that Namibia is to get its very own fully-fledged Namibian Dollar (they decided not to go with the "Kahal"). This raised several questions in my head:

  • Why did we used the South Africa Rand in the first place?
  • What would the exchange rate be between the Namibian Dollar and the South African Rand and how on earth do they determine that?
  • Will we still be able to use the South African Rand in Namibia and, if so, for how long?

Namibia used to be called "South West Africa" and was basically part of South Africa. Only in 1990 did Namibia become independent. Shortly after this, in 1993, the Namibian Dollar was introduced. The Namibian Dollar exchange rate has been on par with the South African Rand since it was introduced and, to this day, you can still use South African Rands in Namibian Dollars interchangeably.  That is generally a good enough answer to give to anyone that asks. But it did make me wonder how exactly the exchange rate could remain the same for over 20 years. It turns out it is called "Pegging" and quite a few countries make use of it. "Pegging" basically involves agreements between the Central Banks of different countries to insure a fixed exchange rate. They do this using an open-market where buying and selling happens at a fixed rate, thus ensuring a fixed exchange rate. You can read more about "Pegging" here.

Conclusion

If you're going to be in Namibia and don't know which currency to take, I would recommend taking South African Rand if you will be returning or going via South Africa, which is the case for many. This way if you return to South Africa, you don't have to do any exchanges if you plan well.

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