ZW VIEW | Mobile money is not the problem. It’s the cash shortage, stupid


The Reserve Bank of Zimbabwe (RBZ) has banned cash-in and cash-out transactions on mobile money. But, by announcing the ban without bringing a solution to the cash crunch, central bank officials are reminding us of what they are; firefighters that miss the real problem for the symptoms.

On Tuesday, 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.

“Notable activities include the buying and selling of cash through mobile money agents at high rates above the approved charges for cash-in and cash-out with some economic agents not banking cash sales under the disguise of cash-back services,” the central bank said in a statement.

RBZ says these platforms are “distorting the pricing of goods and services”. However, while it is true that agents have been taking advantage of the cash crisis, it is also true that this is a symptom of central bank’s own failure to manage money supply.

EcoCash, the country’s largest mobile platform, was set up on September 29, 2011, partly as a response to the cash crisis.

“With critical shortage of US dollar notes, the Econet system will completely eliminate the need for any notes for purchases below US$20,” Econet said at the time.

Eight years later, and because RBZ has still not found a solution to the cash crisis, authorities have now ripped out one of the key functionalities of mobile money that made it a success.

It is true that many EcoCash agents were taking advantage of the crisis, charging big fees for cash. EcoCash recently had to cancel the licences of 4,000 agents. Now, with this latest measure, all 50,000 agents are out of business. It is true, EcoCash itself could have been more proactive. Still, these things happen because greedy people will always take advantage of a crisis left to fester.

As Econet founder Strive Masiyiwa said recently, solve that crisis, and they have no loophole to exploit.

In his monetary policy statement earlier September, RBZ governor John Mangudya admitted as such. He said the “failure to get cash is undermining the confidence in the local currency, as well as forcing economic agents to resort to the illegal transactions in foreign currency and to selling cash at a premium”.

And what did he plan to do about it? He promised to “inject additional notes and coins on a gradual basis, to support productive (sectors) and lessen the inconvenience caused by physical cash shortages to the transacting public”.

He said he wants to keep the level of cash in circulation at between 10% to 15% of broad money supply, in line with what regional economies do.

So, what’s stopping him?

The story of RBZ’s failure to sort itself out is told in its own numbers. In June – and these are the latest numbers available from our data-allergic RBZ – broad money supply stood at $14.78 billion. Of this figure, just 3.19% is in cash and coins. In total, there was $510 million in bond notes and $87.6 million in bond coins.

Total deposits stood at $14.3 billion; the $600 million odd stock of cash is just a fraction of the money available.  

Currency in circulation at 3.19% of money supply (RBZ data)

RBZ would like to tell us that this small amount of cash in circulation is part of a deliberate plan to contain money supply. In truth, they have done nothing of the sort, as the IMF pointed out recently. In fact, by RBZ’s own stats, between June last year and June 2019, broad money grew 70%.

There are other numbers that show how far behind the curve the RBZ is; the total value of mobile and internet based transactions was $9.67 billion in June 2019. Compare this to cash-based transactions, which were valued at $724.76 million in the same month.

EcoCash has handled over $78 billion since launch, and accounts for 98% of all mobile money in the country. It takes up the bulk of electronic transactions; by volume, mobile money currently makes up 82% of all payments. Moves to shift how it works will have some impact on the economy.

The premiums charged by mobile money agents hurt the poor the most, and had to be dealt with. However, they are symptom of a broader crisis; the cash crisis, rising inflation and the government’s failure to deal with these problems decisively. That is where the solution lies, and not in rash regulations, bans and orders that do little to solve the underlying problem.