Mobile money limits cripple retail sector

THE decision to suspend mobile money bulk transactions and put a cap on daily transactions is having a negative effect on retailers and the country’s unbanked population, analysts have said.

This was after Reserve Bank governor John Mangudya recently announced a raft of measures, including suspending mobile money agents and restricting merchant transactions, in a bid to stabilise the local currency — the Zimbabwe dollar — that was introduced last year without critical economic fundamentals in place.

Denford Mutashu, president of the Confederation of Zimbabwe Retailers, said most supermarkets were currently witnessing reduced business due to the $5 000 daily limit imposed on mobile money merchant payments at a time inflation is hovering around 800%.

“The trends will be subdued for now,” he said.

Mutashu’s view was reinforced by a recent snap survey carried out by NewsDay Business in major cities, which shows that supermarkets and hardware stores are no longer enjoying brisk business as only a few customers are using the conventional point-of-sale machines for transactions.

This is more so because only 30% of Zimbabwe’s adult population has access to banking services, while the majority rely on mobile money for their day-to-day transactions due to shortages of cash in the banks.

“It doesn’t make sense for the authorities to put a $5 000 limit on mobile transactions when the price of goods and services are going up on a weekly basis. We are now being forced to charge for our goods in foreign currency, which is a bit unfair for most people who earn Zimbabwe dollars,” Bulawayo hardware shop operator Tafadzwa Makoni said.

Government has blamed the surge in mobile money use for increasing instability of the local currency.

However, since its reintroduction in 2019, the Zimbabwe dollar has been shunned by the market due to its instability, with most people instead appearing to use it to acquire the United States dollars.

This has led to a shortage of the greenback, causing its value to spike, with some having to buy it at a premium of up to 100%.

Zimbabwe has been undergoing a currency crisis for the better part of the past two decades.

The southern African country tried a number of solutions, from banning the local currency to using the United States dollar and introducing bond notes as a surrogate currency.

However, none of the measures have given the country the monetary stability that the authorities and the public so desperately need.

Former Finance minister Tendai Biti said the government was failing to deal with the root cause of the country’s cash crisis.

“The reason why we have a black market in the economy is not because of EcoCash or the stock exchange, it’s because we are simply not producing,” Biti said, adding that increased production would lead to more exports and, thus, more foreign currency that could stabilise the local currency.

“You cannot have a government that specialises in creating difficulties for its citizens. Think of the millions of people who cannot access money in banks, who rely on mobile transfers,” he said.

Economic and political analyst Alex Magaisa also weighed in, saying blaming mobile money providers was an easy, but cheap excuse for the country’s economic troubles.

“Mobile money companies are just the latest in a long list of scapegoats. But even if there were problems on the mobile money payment systems, the impact is not as the authorities are making it out to be. After all, while mobile money transactions account for more than 80% of the volume of daily transactions in the market, they account for only 30%-35% of the value of all daily transactions,” he said on his blog.

the Zimbabwe National Chamber of Commerce chief executive Chris Mugaga said limiting mobile money transactions when there was not enough liquidity in the country was affecting business operations in several sectors of the economy.

“I think EcoCash limits are definitely affecting business. It was a difficult decision for the central bank,” he said.

The latest development also comes at a time when cotton farmers have implored the Reserve Bank to have agents’ lines of ginneries opened so that they can be paid amid concerns that continued delay was further eroding the value of their earnings.

“The timing is bad especially for the thousands of cotton farmers who have worked so hard but can’t get their money,” Stewart Mubonderi, chairman of the Zimbabwe Cotton Producers and Marketers Association, said.