Mobile money ban sends Zimbabwe’s economy spiraling

Central Bank Governor of Zimbabwe, Dr. John Mangudya

from WELLINGTON TONI in Harare, Zimbabwe
HARARE, (CAJ News) – WELCOMED in some quarters and denounced in others, the divisive ban on electronic money transactions in Zimbabwe has sent trade in the notoriously delicate economy into a tailspin.

The government of President Emmerson Mnangagwa last week suspended the mobile money transactions except those for receiving essential payments for goods and services as well as paying for utilities like water, electricity and airtime.

The limit for such individual transactions has been pegged at ZWL5, 000 (US$13,50 or R231,78) per day.

The suspended mobile money platforms are Econet-controlled Ecocash, which accounts for almost ZWL8 billion or 94 percent of the market.

MyCash, One Money (offered by government-owned NetOne) and Telecash, operated by Telecel, are also affected.

While the government insists individual transactions are still open, on the ground, things are more intricate now.

An attempt to pay for a 500g packet of sugar beans at a shop at Mahamba Business Centre in Bubi, Matabeleland North has met with stiff resistance.

“We don’t accept Ecocash. It has been banned,” shopkeeper Andrew Moyo said as he turned declined a customer, Jephat Mkwananzi.

This presents a poser to Mkhwananzi. He, therefore, has to buy Rands, the currency from neighbouring South Africa, or US dollars to transact, at a higher premium of US$1: 130 bonds.

The bond is a form of legal, but reviled, tender released by the Reserve Bank of Zimbabwe (RBZ) to resolve currency shortages. Initially, it was 1:1 to the US currency.

Tsholotsho, Hwange, Victoria Falls and Lupane all in Matabeleland North and Plumtree, Kezi, Gwanda and Beitbridge in Matabeleland South have long ditched the bond note and mobile money transactions causing untold suffering to the largely rural populace.

At Linda Business Centre, 30km from the town of Plumtree (bordering Botswana), along the Izimnyama Road, a bag of cement costs US$7,50 or R150. The equivalent of that in Ecocash is not accepted.

“We order the cement in forex so we don’t take bond notes or Ecocash. We just accept Rands, Pula or US dollar,” said a female shopkeeper at one of the shops.

Declaring the suspension, the government said mobile money transactions had been hemorrhaging the economy through illicit financial transactions, leading to incessant price hikes of goods and services.

Nick Mangwana, the Permanent Secretary in the Ministry of Information, Publicity and Broadcasting Services, said vast sums of money were trading in the Ecocash system, with $8 billion held in 501 000 merchant and agent accounts along with large balances in suspense accounts.

“None of these accounts could be scrutinised by the Financial Intelligence Unit (FIU) of the Reserve Bank of Zimbabwe which could however monitor dealings in bank accounts in the official banking sector,” Mangwana said.

Ecocash, in their own communication, stated, “We urge all Ecocash users, who exceed 10 million Zimbabweans (the country’s population is 14,86 million), the majority of whom do not have bank accounts, to remain calm and do your business as usual.”

Telecash and Net One also said their platforms would operate as normal.

Dr John Mangudya, the RBZ governor, said the crackdown by the government was meant to protect consumers.

“These unprecedented measures have been necessitated by the need to protect consumers on mobile money platforms which have been abused by unscrupulous and nonpartisan individuals and entities to create instability and inefficiencies in the economy,” Mangudya said.

Brains Muchemwa, an economist, warned citizens outside the banking system, especially in the rural and peri-urban setups, would suffer as a result of the tiff between regulators and the operators.

“While the idea to protect consumers is noble, those in the rural areas will not benefit in any way because the message out there is that Ecocash has been banned. Prices of goods will go up and black market traders could flourish,” the economist said.

More than 200 individuals have already been arrested in the Southern African country owing to shops’ rejection of Ecocash payments and bond notes.

Zimbabwe ditched its dollar in 2009 after a period of hyperinflation.

Foreign currencies were used.

RBZ abolished the multiple currency system last year and replaced it with the so-called RTGS dollar.

The upheavals culminating in shortages of notes led to a rise in mobile money transactions.

– CAJ News

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