On Monday 2nd March 2020, the Portfolio Committee on Budget, Finance & Economic Development met with BMOs and Mobile Money Operating Companies. The organisations present were Zimbabwe National Chamber of Commerce (ZNCC); Confederation of Zimbabwe Industries (CZI); Bankers Association of Zimbabwe (BAZ), Econet Wireless/ Cassava Smartech and Telecel Zimbabwe.
ZNCC was represented by:
Mr C. Mugaga Chief Executive Officer
Mr A. Dongo Mashonaland Region Vice President
Mr M. Kamungeremu Harare Branch Chairperson
Mr M. Chundu Macroeconomics Subcommittee Member
Mr B. Sibanda Economist
The Portfolio Committee had written to all organisations requesting submissions on the general state of the economy; money supply situation; views on how to improve the business working environment and; operations of mobile money transfer and how it affects business and other related matters.
Below are the submissions made by the organisations present:-
- Bankers Association of Zimbabwe (BAZ)
- Service providers need to be cognizant of the services and be transparent without overcharging
- BAZ takes its cue from their 2 regulators i.e. The Reserve Bank of Zimbabwe (RBZ) and the Ministry of Finance and Economic Development.
- Bankers are thriving in a cashless economy, they no longer rely on notes for transacting
- Money laundering is still a big problem
- Rejection of lower denominations is mainly coming through the transport business, this has led to banks being left with dead money (1 cent to 50 cents coins)
- There is a slowdown in inflation though the rate still remains high. Growth in inflation is being triggered by reserve money which has grown from ZWL3.3 billion (Dec 2018) to ZWL8.8 billion (Dec 2019)
- Local currency is volatile in the informal market, individuals are preferring foreign currency and many are charging the ZWL currency pegged at the United States Dollar ($US)
- Money supply increase (ZWL35.5 billion by December 2019) is causing a lot of problems in the economy
- Shortages in electricity continues to harm the economy
- Drought has led to a number of problems, chief among them being shortage of basic commodities
- Minimum cash withdrawal is limited at ZWL300 per week, this is a measure towards a cashless society
- Increase demand for cash is being caused by the ‘commoditization’ of cash i.e. goods sold on cash basis fetch a lower price. Use of mobile money is fetching ridiculous premium charges
- Cash is in short supply – the source of cash is the Central Bank, retailers and other economic agents. Once the cash goes into the economy its not coming back into the banking sector.
- To curb the cash crisis there is need to move towards a cashless society; inject some cash but managing it and; also encourage players to bank their cash.
- The economy is too informally skewed
- There little confidence in the banking system; people prefer to keep their cash than bank and wait for days to retrieve ZWL300
- Mobile network – the regulatory terrain is different though they offer similar services to that of banks therefore any wrong doing by either party causes panic. BAZ is regulated by the Central Bank while Mobile networks are regulated by Postal and Telecommunication Regulatory Authority of Zimbabwe (POTRAZ).
- Zimbabwe National Chamber of Commerce
- The economy is turning into a USD economy whilst the Monetary Policy Statement (MPS) is speaking of de-dollarisation
- From the MPS – the RBZ gives conflicting figures in terms of foreign currency deposits. On section 38 it say the deposit decrease to 37% while on section 87 it reflects the deposits at 34.13%.
- 50% of foreign currency is said to be in the hands of 200 companies
- There is too much lawlessness in the economy, there seem to be relaxation to arrest criminals
- The economy is too informalised to the extent that when the MPS is announce, the informal sector just doesn’t care. It is like a choir master that is trying to teach a choir that cannot sing.
- In this economy business cannot bear interest rates above 10%
- Non-performing loans (NPL) are going down due to lack of borrowing than compliance
- Interbank Foreign Exchange (forex) is managed to the extent that it puts off exporters’ appetite. It is as good as non-existent because it’s just there and not benefitting anyone. The main worry is it is becoming a proxy for corruption.
- Forex in the Informal market stands at about (US$1:ZWL30) versus Interbank forex at about (US$1:ZWL18) and the interbank continues to have no money. The queues at the central bank for foreign currency are too much.
- Access to the RBZ governor has to be limited in terms of foreign currency allocation
- Low foreign direct investment shows lack of appetite by investors
- There is too much political noise, the message being sent outside Zimbabwe is not good for national branding. There is need for all political parties to take part in POLAD
- Smuggling – its killing business
- Infrastructure is in a sorry state
- Too many statutory instruments (SIs) regulating the same business. 258 in 2019 alone
- SI33 of February 2019 [Presidential Powers (Temporary Measures) (Amendment of Reserve Bank of Zimbabwe Act and Issue of Real Time Gross Settlement Electronic Dollars (RTGS Dollars)) Regulations, 2019] upon passing the USD1:ZWL1 parity some businesses became insolvent as many had foreign currency credits
- The introduction of local currency through SI 142 [Reserve Bank of Zimbabwe (Legal Tender) Regulations, 2019] did not impact all companies as others were left to continuously charge in foreign currency.
- Policy discord is bad for business
- The playing field is not levelled because they are SIs that protect other organisations
- Government is trying curb nutrition and transport costs
- The current subsidies that are being supplied are not enough, results are being reflected in transport queues and queuing for basic commodities. Subsidies should be in abundance.
- The gap between subsidies prices and market prices is too much, it creates room for unscrupulous activities
- Milling companies are complaining of not being given payouts in time.
- Some subsidies are not following the proper supply chain which then leaves a whole sector being cut out of business e.g. wholesalers
- Policy signaling – policies are never followed, money changers were once arrested but now they operate freely in the streets
- Lack of policy implementation distorts confidence
- The economy is highly integrated, there are no significant changes being made towards the old systems e.g. the economy is still dependent on Agriculture and mining since 1980
- Confederation of Zimbabwe Industries (CZI)
- A strong manufacturing sector is resilient to build a strong economy
- The breaking down of the manufacturing sector is triggered by inconsistent policies
- Importation of goods give cheap goods but is very costly towards the economy in the long run
- Policies should answer the questions of increasing productivity and not decreasing
- Capacity utilisation stands at a low level of 36.4%
- Lack of confidence in the local currency is caused by the previous experiences and the current volatility
- For every 1% increase in reserve money the exchange rate increases by 1.58%
- Proper recommendation is to freeze money supply
- There is no risk of increasing cash as long as it meets the reserve money (law of money circulation)
- For the past 10 years the manufacturing sector has been declining, the energy supply has also been declining.
- Government should lead by example in terms of using the Zim-dollar so as to instill confidence
- Huge cost component for companies is now in foreign currency as many inputs are now charged in forex e.g. fuel, electricity, imported rawmaterials, service providers that are charging at US$ pegged prices
- The Consignment Based Conformity Assessment is slowing down the importation of goods by 8%
- Econet Wireless/Cassava Smartech (Ecocash)
- Ecocash is a mobile money service that allows people to send money, pay for goods and services based on the money sitting in the banks (Trust accounts). Ecocash itself is not a bank.
- Ecocash has 4 Bank Trust Accounts – CBZ, Steward Bank, Stanbic Bank and Ecobank
- Every dollar in customer and agent wallets is matched dollar for dollar with values sitting in the bank (trust accounts)
- Ecocash work with multiple banks i.e. 15 banks in total
- It benefits the customer through financial inclusion, convenience,affordability, accessibility, remittances, payroll, global access global payments, etc.
- Benefits to the nation include revenue collection, tax on revenue, tax compliance across agents, employment creation, remittance inflows, disbursing cash aid to vulnerable communities on behalf of partner NGOs, aiding the cashless society drive etc.
- Ecocash is under the oversight of the Reserve Bank National Payments Systems (NPS). Tariffs and transaction limits are regulated by the RBZ.
- Users are rational, their behavior is guided by macroeconomic guidelines and not by the service provider.
- Telecel Zimbabwe (Telecash)
- Telecel has 2 Bank Trust Account – CABS and CBZ
- Monitoring of Telecash agents is done through a system, it does not capture individuals that do foul play outside of it therefore the organisation depend on customer reports
- The infrastructure of mobile money is not being fully utilized, industry has to accept the use of mobile money
- The pricing structure of mobile money is regulated between 2% - 4%
- There is need to further educate the society and business on the benefits of mobile money
- Inter-operability – there is need for an agenda to solve this. So far it is not possible to send money between mobile money networks i.e. from Econet-Telecel-Netone. If this facility is put in place it is high likely to lower the demand for cash.
- Mobile money is not fueling cash demand as the cash-out limit stands at ZWL100
- The chair asked Econet/ Cassava to provide ecocash figures by end of day Wednesday 4th March 2020.
- He went on the highlight that Econet/ Cassava is not playing fair game in the mobile money network operations as it continues to refuse sharing infrastructure with other operators.
Question and Answer
Qsn: How are banks coming up with charges for swiping?
Ans: Banks, ZimSwitch, Intermediary Money Transaction Tax (IMTT – 2%) and vendor fee queue together at one electronic transaction. Each one has an independent charge.
Qsn: What percentage of economy is formal and informal?
Ans: 70% informal and 30% informal. However, the figures vary from different sources.
Qsn: What is being done to have foul mobile money players put out?
Ans: Communication is continuously being put out to curb foul playing, however it is difficult to catch actors of foul play as it does not pass through the system. Those caught will have their licenses revoked.
Qsn: Are bank charges aligned to the amount moved or there is a flat charge?
Ans: Charges differ according to amount moved.
Qsn: How are businesses surviving without foreign currency?
Ans: They get it from the informal market if it is not available in banks. Economic players are rational, they try to survive than close shop. Some have leveraged in other nations (neighbouring countries) where they have set business there and that’s where some of the foreign currency comes from.
Qsn: What is the business recommendation on subsidy shortages?
Ans: Provide the subsidies in abundance and use the correct channels for distribution.
Qsn: Why does business speak in flowered language when meeting with the President or Ministers?
Ans: Business is always honest with both the President and Ministers. Reports are always sent reflecting on how the current economic status looks like.
Qsn: Business Member Organisations (BMO) should stop playing saints as their members are the main contributors of illicit dealings in the economy. Why are they not stopping such acts?
Ans: BMOs represent formal and registered business and they easily be captured by law if they carry any illegal activities. However, economic players are rational they adapt to the macroeconomic fundamentals as they fluctuate.