Removal of point of sale fees plausible
THE shortage of cash in the banking sector has been a thorn in the flesh for the Reserve Bank of Zimbabwe.
With some of the apex bank’s powers eroded by the use of foreign currency following the demise of the Zimbabwe dollar in 2009, the bank’s authority was depleted significantly.
Prior to 2009, the bank’s note printing division, Fidelity Printers had provided it with a lifeline when there was need to inject more money into the economy albeit the inflationary outcomes of this intervention.
Now armed with the experiences of yesteryear record inflation, RBZ is wiser not to print money and trigger run-away inflation. However, the RBZ’s avoidance of printing more bond notes backed by Afreximbank United States dollars facility did not solve a year old shortage of cash in the banking sector since the country is exporting more US dollars than it can import because of the trade deficit characterising the economy. Meanwhile, the bond notes are not legal international tender.
The haemorrhage of the US dollar into our import destinations has not been met with compensatory export earnings.
On the domestic front, the demand for cash continued being pushed by unsustainable cashless transaction fees, the shortage of cashless transacting technologies and market speculation over the perceived value stability of hard cash.
The shortage of POS machines in the retail sector has also failed the transacting public in a huge way, with some businesses demanding cash only for their goods and services.
The public has on numerous occasions complained about Government’s slow implementation inertia on accepting plastic money on some of its products and services as a reliable payment option.
The Ministry of Home Affairs’ Police Department, ZRP’s CID section at Morris Depot is one such entity not accepting cashless payments; neither has the Traffic Section gone fully cashless.
Domestic rentals, commuter buses and informal horticulture traders are some of the strongest opponents of plastic money. Some of their strongest arguments surround punitive bank charges, difficulty in securing POS machines and uncertainty on getting their money at the banks as and when they need it.
Some of the people involved in the above businesses are also cross border traders who need hard cash to import the various wares they also sell for cash alone in order to recoup the cash they would have invested. These types of businesses have continued piling pressure on the banks to give cash which the banks do not have.
This scenario has created never dying queues at banks throughout the month. The RBZ has to act over and above the $175 million worth of bond notes it has dished into the economy so far.
The removal of the five percent POS transaction levy by the RBZ as announced by the Minister of Finance, Cde Patrick Chinamasa in his mid-term budget review last Thursday, is a step in the right direction in promoting cashless payment systems.
Last month, the biggest mobile money transacting platform, Ecocash introduced a tollgate payment system to remove the headache motorists faced in crossing tollgates as ZINARA demanded cash only.
This month, Ecocash went a step further by halving user fees. These are beneficial Government-Business synergies meant to soothe the cash payments pains in the economy.
Furthermore, the reduction and removal of transacting fees would immensely reduce the demand for cash and reducing bank queues. The onus remains on other economic arms of Government to deal with trade deficit issues which continue to deplete the country’s foreign reserves through hard cash leakages into import commitments and nostro accounts settlements. While the market celebrates the relief provided by the RBZ and Ecocash, other stakeholders in the monetary system must be encouraged to seek solutions to help the economy.
Likewise, other mobile payment platforms must emulate Ecocash and reduce transaction charges.
Banks must also invest in improving their bank network, import more POS machines. Government is duty bound to incentivise banks by removing import duty on POS ware and consider subsidies on them.
The civic movement must also lobby cash savvy business entities and individuals to embrace cashless transactions as a safe and convenient payment model ahead of cash. In the same vein, pensioners must be assisted to join the plastic movement.