POS supplies undermine cashless campaign

Zimbabwe’s campaign to promote cashless transactions due to worsening cash shortages is under threat from a critical shortage of Point of Sale (POS) machines for credit and debit card transactions.

The market has an estimated 35 000 POS machines against a December target of 50 000.

The target figure is still a far cry from what the market, with a population of over 10 million people, would require.

With rural areas most affected, villagers endure long distances in search of shops with POS machines but even if they stumble upon one, the system may malfunction during transactions due to poor connectivity.

Analysts said the drive towards a less cash society has not been backed by critical infrastructure development.

Retailers are faced with the daunting task of meeting demand as cash reserves continue to dwindle.

The demand for POS gadgets has also been spiked by various institutions that thrive on monetary transactions like churches, schools and government departments.

These institutions have somewhat embraced the use of plastic money, but the price of acquiring a POS machines is highly prohibitive.

Some banks are reportedly charging US$35 per day for a POS gadget for occasions such as weddings.

While some institutions continue to demand cash up front, Zimbabwe has already made strides towards becoming a cashless society which is commendable, according to analysts.

Analysts said the campaign towards the use of plastic money should have been promoted when Zimbabwe dollarised in 2009. This would have exerted less pressure on the US dollar.

Confederation of Zimbabwe Retailers (CZR) president, Denford Mutashu, said there was a critical shortage of POS machines and this was now a cause for concern to retailers.

He said retailers were failing to get POS machines from banks even though the central bank said these should be made available within 72 hours of application.

“There is a huge concern because some retailers are applying and failing to get the POS machines on time. The Reserve Bank of Zimbabwe (RBZ) said if one applies, they would get the POS machine in 72 hours but it’s taking forever,” said Mutashu.
RBZ governor, John Mangudya, last year called for an extensive programme to increase POS machines in the country.

Apparently, many wholesalers and retailers were operating without POS machines in their outlets.

“This scenario exacerbates demand for cash as consumers will be compelled to look for the required amount of cash to transact with them. Accordingly, all retailers, wholesalers, businesses, local authorities, utilities, schools, universities, colleges, service stations, the informal sector among others are, with immediate effect required to install and make use of the requisite POS machines, so as to reduce the demand for cash in the economy,” Mangudya said back then.

He said all utilities and municipalities would be compelled to promote the use of plastic money by installing the POS machines in their banking halls. This requirement, he said, would also apply to government departments and public entities that provide services on cash basis to the public, such as the Ministry of Home Affairs’ Registrar General’s department, the Zimbabwe Road Authority and government hospitals.

Most government departments and local authorities have complied with this directive.

Mutashu said the liquidity challenges could only be eased by an increase in the use of plastic money.

“The liquidity situation is still dire and we need an alternative which is the POS. But when businesses continue to fail to access the POS machines, it then obstructs the smooth flow of business,” Mutashu said.

Economist, Headache Makura, said the POS roll out was a fire fighting mission that may need to be sustained by hard currency.

“For every virtual transaction, we need hard currency to back it up so what was addressed is transactionary problems not liquidity so our problem still persists,” said Makura.
He said the market was likely to get chaotic due to the shortage of cash and the limited availability of POS machines.

Makura argued that the POS system needed to come with incentives like in other countries where there are benefits for using the system other than just to ease transactions.

“In other countries there are benefits of using the card, but here it seems our circumstances forced everyone to use the card,” he said.

Although the POS system has become popular on the market, technical glitches have often affected the smooth flow of business as customers are left stranded due to system malfunctions.Just before the introduction of bond notes, unscrupulous retailers would tamper with the POS machines to demand cash from customers.

But now, largely due to worsening cash shortages, the system is getting overwhelmed and networks are failing to cope.

“Those retailers who have the POS facility are often affected by poor network and double debiting. So the network providers also need to work with various banks to eliminate system failure,” said Mutashu.

An estimated 70 percent of transactions are currently being done using the POS system.
Mutashu said the 35 000 POS machines available on the market were a far cry from the 50 000 required for businesses.

He said the mismatch was likely to put pressure on the already dwindling money supply.

The POS system has also been hampered by growing insecurities caused by the public’s desire to hold cash owing to lack of trust in the banking sector. Financial Gazette