Govt has suspended EcoCash, ZSE over ‘sabotage’. Here are a few numbers to show why this is a bad idea

Ecocash

The Zimbabwe government has suspended all mobile money platforms and the stock exchange, blaming them for the collapse of the Zimbabwe dollar on the black market.

The Government claims it has “impeccable intelligence” linking mobile money and the Zimbabwe Stock Exchange (ZSE) to what it calls economic sabotage.

The local currency has fallen to around 100:1 on the parallel market, stoking a fresh round of hyperinflation.

However, government’s solution to this currency crisis is suicidal, as mobile money accounts for the bulk of the number of payments made in the economy.

Five numbers that show why this is not a bright idea:

82.64% – this is the percentage of all payments in the country that go through mobile phones. This is according RBZ’s latest figures. This was followed by point of sale payments at 16.56%, ATMs with 0.20% and RTGS 0.61%.

Now that mobile money has been suspended, the effect is that the economy cannot transact. Without cash, most rely on mobile money for business, wages, and daily personal transactions such as bill payments – including for electricity – and shopping.

98.31% – That’s EcoCash’s share of mobile money transactions. 

7,673,201 – That’s the total number of mobile money accounts in the country, according to data from the telecoms regulator POTRAZ. All these millions of users find themselves suddenly unable to transact or access their money. 

29,515,622 – That’s the number of mobile money transactions per week

Z$12,193,008,455 – this is the amount of money used to buy airtime, pay bills and buy goods using mobile money in the first three months of this year. A further Z$7.1 billion was handled on cash-in and cash-out transactions.

The government has been looking for a scapegoat for the currency crisis. At the burial of national hero Stanley Nleya on Wednesday, President Emmerson Mnangagwa raged at unnamed “wolves in sheep clothing” that he blamed for the collapse of the currency.

Earlier this month, Mnangagwa also ranted at unnamed “economic saboteurs” that he said were disrupting the economy. We wrote then that this paranoia was a sign that, as it had always done before, ZANU PF was about to enter a new period of radical economic controls.

In a statement on Friday, the Ministry of Information, said: “These measures include the suspension of all monetary transactions on phone based mobile money platforms in order to facilitate intrusive investigations, leading to the arrest and prosecution of offenders. Concurrently, this measures will also include the suspension of all trading on the Zimbabwe Stock Exchange.”

The measures would remain “until such time that the mobile money platforms have been reformed to their original purpose and all the current phantom rates of exchange have converged into one genuine rate that is determined by market forces under the Foreign Currency Auction System” launched earlier this week.

The suspension of the ZSE is sure to rattle investors, who have used stocks as a hedge against inflation. As at Friday, the ZSE’s all-share index was up 677% since January.

The ZSE has been suspended before. In 2008, RBZ shut down the market, using the same reasons being used now; “sabotage”. It reopened three months later after Zimbabwe moved to the multicurrency system.

Suspending the stock exchange is also a major knock on Zimbabwe’s already threadbare image as an investment market.

Through its Financial Intelligence Unit, central bank has over recent months fought EcoCash over what it says was a “ponzi scheme” being run by the platform. EcoCash has denied involvement in any illegal actions.

In May, Finance Minister Mthuli Ncube told reporters he wanted mobile money companies brought under RBZ supervision, and not under POTRAZ.

On Friday, the government said EcoCash “is the centre pivot of this problem and its resultant impact on Zimbabwe’s economy”.

In September last year, RBZ announced that it was banning the withdrawal and deposit of cash on mobile money platforms, as well as cash-backs by retailers, a response to high charges levied by agents taking advantage of the shortage of cash. The suspension was later lifted.

In March his year, government stopped the fungibility of shares in counters such as Old Mutual and PPC, saying the ability of stockholders to move these shares across borders was behind the Zimdollar’s collapse. However, this move did not stop the local unit’s slide.

In its Friday statement, the government remarkably claimed there were “fake counters” on the ZSE.

Again, government again blamed the Old Mutual Implied Rate (OMIR) for black market activity. The OMIR is roughly an exchange rate derived from comparing the share price of Old Mutual in Zimbabwe and the price of the same share on other markets, such as the JSE in South Africa. The rate is not set by the company itself.

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