A Zimbabwean government directive banning the purchase and sale of cash through mobile money services may halt much of the nation’s commerce as the biggest system will have to be shut down temporarily, its operator said.
The ban, a directive aimed at stabilising a monetary system that’s spiralling out of control as the national currency plunges, can’t be effected unless the Ecocash mobile money system is “pulled down”, Econet Group unit Cassava Smartech Zimbabwe said in a filing on Tuesday at the high court of Zimbabwe.
A chronic shortage of cash in Zimbabwe has driven most commerce onto electronic platforms, the most popular of which is Ecocash. The economy is set for its first contraction since 2008, has an inflation rate that’s estimated at more than 900% by some analysts and is struggling to pay for sufficient food and fuel imports. Ecocash has about 6.4 million active users in a country of about 14 million people.
“This platform handles seven million transactions per day by approximately two million people,” Cassava said in the documents. “Pulling down Ecocash could mean loss of life, loss of opportunities that could save livelihoods and financial loss running into hundreds of millions if not billions.”
The directive, which the Reserve Bank of Zimbabwe said was necessary because of commissions charged by agents, follows a 28 September announcement enforcing the use of the Zimbabwean dollar and banning the quoting of prices in foreign currency.
Mobile money transactions created an implied exchange rate because some agents charged premiums of as much as 60%, finance minister Mthuli Ncube told reporters in the capital, Harare, on Monday. “We decided to close that gap of multiple exchange rates,” he said.
The Zimbabwe dollar fell to a record low of Z$15.29/US$ in inter-bank trading on Tuesday, down from the Z$2.50 it was introduced at in June. It trades even lower on the black market.
“I do not see how it would crash their system as this is only one service out of a wide range of other functions of the system,” said George Guvamatanga, Zimbabwe’s secretary for finance. “There is market misconception that the new measures have closed the whole mobile money services, but it’s not true.”
The government is making attempts to improve access to cash, President Emmerson Mnangagwa said in a speech to parliament on Tuesday.
”Government is fully aware of the challenges faced by the public in accessing cash, which has resulted in some unscrupulous traders selling cash in exchange for electronic money,” he said. “Appropriate measures are being taken to address the cash situation, which include a gradual removal of arbitrage opportunities created through multi-tier pricing.” — Reported by Antony Sguazzin, Ray Ndlovu and Godfrey Marawanyika, (c) 2019 Bloomberg LP