Ministers have recently issued threats against Econet’s mobile money service, EcoCash, whose agents are accused of charging desperate Zimbabweans looking for cash a massive premium of up to 60 percent.
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“EcoCash manager may face arrest if her business continues to inconvenience the public by charging exorbitant transaction costs,” deputy information minister Energy Mutodi tweeted on September 17.
Now Econet Group has come out saying that the Zimbabwean government directive banning the purchase and sale of cash through its mobile-money service may halt much of the nation’s commerce as its system will have to be shut down temporarily.
RELATED READING: ZIMBABWE BANS CASH IN, CASH OUT AND CASH BACK
The ban, a directive aimed at stabilizing a monetary system that’s spiraling out of control as the national currency plunges, can’t be effected unless the Ecocash mobile money system is “pulled down,” Econet unit Cassava Smartech Zimbabwe Ltd. said in a filing Tuesday at the High Court of Zimbabwe.
RELATED READING: ECOCASH SEEKS TO OVERTURN RBZ’S BAN, FILES URGENT APPLICATION AT THE HIGH COURT
A chronic shortage of cash in Zimbabwe has driven most commerce onto electronic platforms, the most popular of which is Ecocash. The economy is set for its first contraction since 2008, has an inflation rate that’s estimated at more than 900% by some analysts and is struggling to pay for sufficient food and fuel imports. Ecocash has about 6.4 million active users in a country of about 14 million people.
“This platform handles 7 million transactions per day by approximately 2 million people,” Cassava said in the documents. “Pulling down Ecocash could mean loss of life, loss of opportunities that could save livelihoods and financial loss running into hundreds of millions if not billions.
The directive, which the Reserve Bank of Zimbabwe said was necessary because of commissions charged by agents, follows a Sept. 28 announcement enforcing the use of the Zimbabwean dollar and banning the quoting of prices in foreign currency.
Mobile-money transactions created an implied exchange rate because some agents charged premiums of as much as 60%, Finance Minister Mthuli Ncube told reporters in the capital, Harare, on Monday. “We decided to close that gap of multiple exchange rates,” he said.
The Zimbabwe dollar fell to a record low of 15.2913 per dollar in inter-bank trading on Tuesday, down from the 2.5 it was introduced in June. It trades even lower on the black market.
“I do not see how it would crash their system as this is only one service out of a wide range of other functions of the system,” said George Guvamatanga, Zimbabwe’s Secretary for Finance. “There is market misconception that the new measures have closed the whole mobile-money services, but it’s not true.”
