EcoCash, its agents and the RBZ are collectively the most topical subject in Zimbabwe right now. Taking a closer look at the saga which culminated in the Reserve Bank of Zimbabwe banning cashing in and out of mobile money platforms reveals the politics of the situation:
First the economics
The summary of the situation in Zimbabwe is that for a long time the government insisted that Zimbabweans were still using US Dollars even though the government had wiped out our bank accounts of real money and replaced it with fictional numbers that we would just pass around as money.
Of course the market is perceptive and the value of money became dependent on what form of payment you were using. If you paid in cash you paid less than if you used electronic means including mobile money. To try to bandage things together, the government introduced Bond Notes which they said were a pseudo currency that represented USD at a 1:1 ratio on the face value.
This merely changed the pricing dynamics to 3 tiers in the market. If one paid in USD they paid the least followed by payment in Bond Notes and then lastly through electronic means. The disparity in the value attributed to cash vs electronic forms of money didn’t go away even after the government abolished the use of USD and other forex. In fact the riff between the value of cash and non cash widened. Some informal businesses would reject non cash payments altogether especially public transport operators.
Desperate individuals who wanted to buy goods cheaper or be able to buy at all were forced to go to street brokers who accepted their electronic money and gave them cash. Of course the said brokers would have a fee for their service. The most dominant payment channel for retail payments is EcoCash and thus most of these transactions involved the mobile money service.
Public outrage
Of course the public was enraged. The problem (in my view) is that the public concentrated on the last mile guy they buy cash from: the EcoCash agent and by extension EcoCash itself. As far as the ordinary person was concerned, the EcoCash agent was a mean person taking advantage of them and EcoCash had to swoop in and stop this villain. I always contended that there is not much EcoCash could do because the problem was at the fundamental core of supply and demand.
On Twitter, the EcoCash CEO, Natalie Jabangwe was attacked for ‘doing nothing’ to solve this. Was it her problem to solve though? In part yes. EcoCash announced they were and had shut down agents they suspected of ‘abusing’ their platform by selling cash.
I think it’s debatable whether we should call this abuse. If I have something you want and are willing to pay for it, am I abusing you when I sell it to you? Pricing is the market’s response to the difficult question of resource allocation. The responsibility for this conundrum has always been on the shoulders of government and the central bank. They are the ones who made the value of cash different from that of bank balances.
Anyway, the public was angry and that anger especially on social media was directed at EcoCash agents and ultimately at EcoCash.
Strive Masiyiwa and his road
As the rage waged on, Strive Masiyiwa weighed in. He argued that it wasn’t his mobile money company that was to blame. he described EcoCash as merely a road and it was senseless to uproot the road just because thieves used it sometimes.
Masiyiwa was not 100% sincere here. No one was asking anyone to uproot the road but people were asking for checkpoints on the road to try to stop the thieves. I am actually quite sympathetic to EcoCash here and I don’t think any checkpoints were gonna work. However, people wantyed to see an attempt and they did not feel such an attempt was being made. Masiyiwa evaded this. No one had said the probem had originated with Ecocash, they just wanted the owners of the platform they used and depended on to do more than distribute fliers that said ‘don’t buy cash.’
Public rage gets hijacked
A desperate government does desperate things. The public’s misdirected anger was a gift from Santa to Zimbabwe’s government. They fueled that rage only so that the public would be blinded from the real issues for example the fact that the government is failing to deliver on any of its promises including ‘opening Zimbabwe for business.’
Even the anti corruption commission which has been failing to prosecute blatant and widely known corruption cases saw opportunity in the new villain called EcoCash. They labelled the selling of cash by agents as corruption that reached the top at EcoCash even pointing out Natalie Jabangwe specifically.
Sadly, anger is blinding. The public was gullible and their anger was used against them. The big bad wolf became EcoCash and the real guys who caused all this mess in the first place were not part of the narrative.
Banning of cash in and out
The RBZ issued a directive banning mobile money operators (EcoCash really) from offering cash-in and cash-out services anymore. This was an ill advised move and probably motivated by a desire to be seen to be doing something more than anything else. Weak motivations lead to weak decisions and this one was the weakest stuff.
The result of this is that the cost of cash on the streets has more than doubled now. Now the public can see that they were angry at the wrong fella. The problem is that there is a distortion in the market and that distortion has more to do with people’s lack of confidence in the government and by extension the banking system. This makes the perceived value of money held in bank accounts and mobile money wallets less than that of cash.
As I argued before, the rush moves the government continues to make like the banning of cash-in and cash-out itself only depend the distrust and thus the gap in value people ascribe to physical cash and electronic balances. The problem will not even go away if they do mass arrests of people selling cash in the streets. If they do that it will get worse. The higher risk that will then exist when selling cash will make the enterprising street people charge more for their service. Cash will still be sold and bought but at a higher price like is happening today.
This should tell all who have been asking EcoCash to ‘do something’ that if EcoCash had ‘done something’ the price of cash would have increased. Mangudya ‘did something’ on Monday and the premium on cash is at 100% now and it may get even worse than this.