By Africa Moyo
The Reserve Bank of Zimbabwe (RBZ) has — with immediate effect — banned all cash-in, cash-out and cash-back transactions, which were being used by dealers to extort members of the public of their hard-earned cash.
Further, the cash-in, cash-out and cash-back transactions, had become sources of price instability as traders would charge up to 60 percent if one was not making a cash transaction.
RBZ Director Financial Markets, National Payment Systems Mr Josephat Mutepfa yesterday said it had come to the attention of the central bank that some economic agents were “engaging in illegal activities abusing the cash-in, cash-out and cash-back facilities, thereby compromising the public interest objectives of national payment systems in the economy”.
“Notable activities include the buying and selling of cash through mobile money agents at high rates above the approved charges for cash-in and cash-out, with some economic agents not banking cash sales under the disguise of cash-back services,” said Mr Mutepfa.
“The charging of commissions outside the approved framework adversely affects the smooth operation of payment systems and have the negative effect of distorting pricing of goods and services.
“In view of the above, all mobile payment system providers and merchants are hereby directed to discontinue cash-in and cash-out with immediate effect. Furthermore, all economic agents are, with immediate effect, directed to discontinue cash-back facilities.”
He said banks, mobile payment system providers and other economic agents were reminded to ensure that the entire ecosystem operates within the confines of the law and enforce compliance.
An Econet official told The Herald yesterday that they were studying the ban. “I can confirm we received the directive and we are looking at it,” said the official.
NetOne CEO Mr Lazarus Muchenje and Telecel Zimbabwe CEO Mrs Angeline Vere, were not answering their mobile phones when contacted for comment last night.
Finance and Economic Development Minister Professor Mthuli Ncube told journalists after yesterday’s Cabinet briefing that the decision to ban cash-in, cash-out and cash-back transactions was motivated by the desire to reduce the burden on citizens who were needlessly losing value for their money.
“The feeling here was that on the cash-in, cash-out transactions, there was an implicit exchange rate that was applying because of the discounts that these agents were applying; discounts as high as 55 percent or 60 percent on RTGS balances.
“That’s what (brought) that directive from the Reserve Bank of Zimbabwe. That is what it is trying to deal with, to make sure that it (discounts for cash) does not become yet another rate,” said Prof Ncube.
He said the country was going back to multiple exchange rates and the RBZ ban seeks to try “to close that gap”.
“Then over time, obviously cash in circulation will be increased; so we should expect that to happen,” said Prof Ncube.
Economist Mr Persistence Gwanyanya said the reaction by RBZ on the cash-in, and cash-out transactions “was ostensibly driven by the need to restore sanity in the financial services sector”.
“Given the RBZ’s primary duty to ensure price and financial services sector stability, the intervention of RBZ is unsurprising as our enterprising population was increasingly abusing the cash-in, cash-out facility by selling cash at exorbitant rates of up to 60 percent.
“However, what is more important is to understand the drivers of these unscrupulous behaviours for more effective policy intervention.
“We expected RBZ to concurrently increase the cash in the economy to recommended levels of 10 percent to 15 percent of money supply, which is also the desired level RBZ indicated in the recently announced Mid-Term Monetary Policy Review,” he said.
With the current money supply level of around $15 billion, cash in circulation should be between $1,5 and $2,25billion.
Presently, there is about $600 million cash in circulation, which Mr Gwanyanya said was “way lower than the required amounts”.
“Whilst it may appear obvious that RBZ should simply increase cash in circulation, the issue is a bit complicated as the leadership has already indicated that the bond notes and coins are on their way out, with new currency coming.
“So it’s illogical to increase the amount of money that is being phased out, which speaks to the need to expedite the new currency that was spoken about by the President himself,” said Mr Gwanyanya. The Herald