By Bevan Musoko
The move by the Reserve Bank of Zimbabwe to ban all cash-in, cash-out and cash back transactions on the national payments platforms is a welcome move as the system was being abused by notorious cash barons to fleece ordinary people of their hard-earned money. It is probable that these cash barons were working in cahoots with some corrupt bank employees who would give them cash for resell at the astronomically high premiums, instead of dispensing it to bank clients. It boggles the mind how these cash barons would access huge sums of cash yet banks claimed that they did not have cash to dispense to their clients. Something was amiss.
It had become systematic that cash barons would charge individuals as much as 60 percent of the value of the transaction to give them cash. This was having a distortive effect on the pricing system of goods and services as retailers would eventually pass this extra cost of cash to consumers. This eventually made others-wise affordable goods and services expensive due to these parasitic tendencies.
This system of percentage premiums on cash had given birth to the uneconomic and deeply unpopular three-tier pricing system whereby a single commodity, say bread, manufactured by the same manufacturer, would be priced differently by retailers depending on the mode of payment by the consumer. A cash payment would attract a different price, while EcoCash and One-Money payments would have different prices. This amounted to daylight robbery as the standard pricing models were then rendered ineffective.
In a directive to all financial institutions and mobile payment service providers, RBZ Deputy Director for Financial Markets, National Payments Systems, Josephat Mutepfa said “the charging of commissions outside of the approved framework adversely affects the smooth operation of payments systems and have the negative effect of distorting prices of goods and services.”
While cash barons were making a killing through the commissions, the general public blamed Government for allegedly failing to avail enough cash into the formal system. Each moment Government would inject more liquidity into the formal market, the corrupt bank employees would immediately channel it to the front dealers, the cash barons, thereby undermining the otherwise noble Government interventions. The political fallout would be blamed on Government, yet it was these cartels subjecting the ordinary citizens to hardships.
Eventually, the new measures have the effect of addressing the theft of public funds by these cash barons, while also relieving Government of the political pressure to address the liquidity challenges facing the economy. It is expected that the wades of bank notes that had become a common sight at most street corners, particularly in Harare and Bulawayo, would be released into circulation as the facility for their trade in premiums (cash-in & cash-out) has been banned.
Economist Persistence Gwanyanya told the media that the latest RBZ move needs to be complimented by a concurrent increase of cash circulating in the economy to between 10 and 15 percent of money supply which currently stands at around $15 billion. Currently, around $600 million cash is circulating in the economy, as opposed to the required cash of between $1.5 and $2.2 billion. It is this gap in circulating cash that the corrupt bank employees and their fronts were exploiting to milk the public through the commissions.
While other economic analysts have cautioned that the ban may turn the parallel market into a complete cash market, thereby intensifying demand for cash, the general public is relieved that their hard-earned money will not be stolen by those with access to cash.
Government, through the RBZ, needs to strictly enforce the acceptance of various modes of payment for goods and services. This is against the current practice where some retailers are refusing to accept some modes of payment. This has the effect of putting pressure on the little available cash, hence the resort to premiums by those with access to cash. Government policy is that all modes of payment, such swipe cards, mobile money through Mobile Network Operators (MNOs) and cash are all legal and legitimate. This policy needs strict enforcement to do away with the discriminatory practices by unscrupulous businesspersons.
