A cashless economy in Zimbabwe? With little cash, there’s little choice
The time came for worshipers to surrender their tithes on Sunday morning. But instead of dropping bills into a collection plate, the congregants at a large Pentecostal church rose and filed toward the deacons clutching hand-held card-reading machines. With a swipe, they were done.
“Yes, it looks like shoppers in a supermarket,” said Mercy Chihota, 33, a member of the church, the United Family International Ministries, in Harare, Zimbabwe’s capital. “It feels good, but strange at the moment, because it’s very new.”
Of all the places speeding toward a cashless economy, this nation in southern Africa may not come to mind. About 90 percent of Zimbabweans work in the informal economy, where cash is usually a must. The country, despite the spread of cheap smartphones in recent years, remains low-tech. Blackouts are part of everyday life.
But Zimbabwe is hurtling toward a plastic future for a simple reason: It is running out of cash, specifically the American dollars it adopted in 2009 before abandoning its own troubled currency. Anxious about their nation’s political and economic troubles, many Zimbabweans have been hoarding dollars or taking them out of the country. Banks have slashed daily withdrawal limits. A.T.M.s now sit empty.
Debit card machines are proliferating in Zimbabwe’s cities - not only in churches but also in supermarkets, betting parlors, nightclubs, parking areas and every other business happy to accept paper cash but unable to dispense it. If there are no cardreading machines around, many shoppers now text payments on their cellphones.
The change has been revolutionary for what was a mostly cash economy until early this year. It has helped ease the cash crisis, which paralyzed business a few months ago. In a fragile economy reeling from a global collapse in commodity prices, a historic drought and lack of investor confidence, the spread of plastic is the one bright spot.
“We had to migrate to electronic platforms as a matter of necessity, rather than as a matter of choice,” said Clive Mphambela, an advocacy and marketing executive at the Bankers Association of Zimbabwe. “Zimbabwe is unique in many, many respects, and this is just one of them.”
The cash crunch remains so severe that the government started a media campaign this week to publicize the imminent introduction of so-called bond notes, paper notes that it says will be backed by the African Export-Import Bank and will be interchangeable with the American dollar. But most Zimbabweans already view the notes with deep distrust, suspecting a government ploy to reintroduce a local currency.
“I wish I could withdraw my money just at once than to keep visiting the bank every day, and I pray I could do this before bond notes are distributed,” said Precious Makaza, 28, a schoolteacher who was standing in a long line in front of ZB Bank on Robert Mugabe Road.
In rural areas, where there is no electricity or cellphone coverage, there is so little cash that residents are returning to a fallback they have used plenty of times: bartering. Corn, goats or chickens are swapped for goods and services, a system Zimbabweans have used to survive previous economic crises.
The cash shortage stems from the uncertainty surrounding President Robert Mugabe, 92, the world’s oldest serving head of state. With the president’s health declining and with no clear successor, infighting has swept through Mr. Mugabe’s ZANU-PF party. Protests led by opposition groups have become regular occurrences on Harare’s streets.
When the country’s political and economic crisis of a decade ago led to hyperinflation, people spent their Zimbabwean dollars as fast as they could before the money lost its value.
But in the latest crisis, the surest thing in Zimbabwe is the American dollar, which people prefer keeping instead of spending.
Desperate for a financial lifeline, Mr. Mugabe’s government has re-engaged in talks with the International Monetary Fund in the hope of securing loans. But progress appears to have stalled because the Zimbabwean government has retreated on economic reforms, including slashing the bloated government work force, which accounts for an eye-popping 97 percent of government spending.
Surrounded by so much uncertainty, many Zimbabweans are just keeping hard cash out of circulation.
“Politically exposed people are afraid of keeping their money in the country,” said Prosper Chitambara, an economist at the Labour and Economic Development Research Institute in Harare. “I also know a number of businesses that are no longer banking their money. They would rather keep their cash in their safes. When you bank, it’s difficult to get the money when it’s required.”
To withdraw money from their accounts, many Zimbabweans must spend hours in lines or make multiple visits to their banks. Credit cards are accepted at very few establishments in Zimbabwe.
To keep cash inside the country, the government has banned imports of certain goods. It has also encouraged the use of debit cards and mobile money. In August, there were more than four million debit card transactions in the country, more than three times the total in January, according to the Reserve Bank of Zimbabwe.
For months, business was languishing at the Tipperary’s nightclub, a popular spot for professionals in Harare. Patrons simply did not have the cash to hang out.
“Since the introduction of swiping machines, business has improved a bit,” said Edmund Rukweza, a bartender at the club.
Some have discovered the strange change in consumer behaviour induced by plastic.
“I’ve found it less painful to use my card than taking out hard cash from my pocket,” said Edward Vambire, 32, who had spent $3 on three lottery tickets at the MegaGame Sports Betting parlor.
In churches, offerings had plummeted because parishioners used the little cash they could withdraw for food and other basic necessities. Now many churches accept tithes by debit cards, cellphone payments or wire transfers.
“If one wants to swipe, let them swipe,” said Douglas Rowedi, an elder at the Church of the Pentecost Zimbabwe. “If one is able to bring cash, let them bring it as it is.”
But some parishioners said the growing use of debit cards had sharpened the economic cleavages in the congregation.
“We now see the rich in church showing off their status as they stand up to swipe their cards, while those with no bank cards are made to feel like outcasts as we throw our offerings in containers passed around by deacons,” said Agrippa Muvhaku, 26, a member of the United Family International Ministries. “Before the coming of swiping machines, we were all equal in the church.”
Nearly 70 percent of Zimbabweans do not have bank accounts, restricting the use of debit cards to a minority. Many without bank accounts use mobile money through their cellphones; they are allowed to turn digital cash into legal tender at designated outlets.
But Mr. Chitambara, the economist, said that mobile money users were often being charged informal fees to withdraw cash.
“There’s been a lot of rent-seeking and arbitrage,” Mr. Chitambara said. “There are some people who are making a killing out of the situation.”
Perhaps the biggest killing was being made in rural areas like Mutoko, a district about 90 miles northeast of Harare.
In Nyamuzuwe, a village where there is no electricity and cellphone coverage is very spotty, the cash shortage had ground business to a halt.
Residents no longer sell vegetables by the roadside because passing drivers lack cash. Ezra Mbigu, the owner of a solar panel who used to charge customers 50 cents to recharge their cellphones, now reluctantly accepts a cup of beans instead. Villagers trade two pounds of sugar for a bucket of corn, or livestock for basic items.
But Fambai Mudzaniri, 48, a trader in a neighbouring village, was earning monthly profits of $500 from the cash shortage. In Harare, Mr. Mudzaniri bought Chinesemade cellphones for $13 each and then sold them to villagers for one goat or three or four chickens, depending on their size.
He then took the goats to Harare and sold them to restaurants for $40 to $50 each.
“So to me,” Mr. Mudzaniri said, as he and his three assistants came to peddle their wares in Nyamuzuwe, “the cash crisis in the village here is time to make money.”