It is now exactly three years after the Reserve Bank of Zimbabwe governor Dr John Mangudya hogged the limelight and called Ecocash a ponzi scheme, blaming it for the crushing of the ZW Dollar as black market rates began shooting.
At this moment in time, I guess it would be prudent for him to apologize to the mobile money service provider Ecocash, or maybe at most to Zimbabweans, after selling that fictitious narrative.
By Toneo T Toneo
The governor made a very sensational claim that Ecocash was creating artificial money and funding the system, hence it was responsible for excess revenue in the market.
Back then the Reserve Bank of Zimbabwe (RBZ) branded EcoCash a Ponzi Scheme which is accelerating the black market exchange rate and devaluing the Zimbabwe Dollar. The RBZ claimed that EcoCash has agents who have a massive overdraft on their Ecocash accounts which is well in excess of ZWL$39 million. The RBZ made the allegations when it filed its notice of opposition to EcoCash’s urgent application filed at the High Court.
The move was followed up by stringent of measures which today have crippled the once biggest mobile financial service provider in the country, causing almost a hundred to be retrenched as the central bank tightened screws on EcoCash, slowing down its operations.
To date, one can not make any significant transfers using Ecocash or any mobile money platform as the bank has limited monthly limits and one-time transaction value, with maximum limits per transaction being pegged at $100 000 (only doubled today) while the monthly transaction has been moved to $1 200 000 for individuals.
This basically means per month, one can only move an equivalent of only $200 USD , a very small amount that completely alienates mobile money from the domestic market transactions, giving an unfair advantage to its competitors like Zipit and bank transfers, which have up to $5million swiping value and unlimited money transfer.
However the free fall of the RTGS has been going on unchecked and this time around, the mobile money players are not to blame, and the government has not explained who is flooding the market with the RTGS.
The efforts by the same central bank to clean excess currency via gold coins and digital currency buying billions of RTGS every month have not yielded any results, causing serious suspicion that the central bank once again may be funding the market with excess currency
The RBZ is defending its decision to freeze and suspend accounts belonging to agents who trade in excess of ZWL$100 000 per month. This is approximately USD2 000 using the black market rates.This comes after EcoCash dragged the central bank to the courts alleging that the directive to suspend thousands of accounts was irrational and illegal. EcoCash wants the directive to be suspended arguing that it will cause irreparable damage to its agents as well as innocent Zimbabweans.
In the notice of opposition RBZ governor, John Mangudya claimed that EcoCash was creating fictitious money which is being used to buy foreign currency and inflate the exchange rate.
“What the general public does not know is what happens in the interim. The funds that have not been credited to the vendor or the recipient are then available for trading on the Ecocash Platform in the foreign currency market. In effect, the delays allow a certain person, who was the subject matter of an investigation, to buy and sell foreign currency in the intervening period.”How can an entity or individual have an overdraft on an electronic payment platform such as Ecocash?”
“What the general public does not know is what happens in the interim. The funds that have not been credited to the vendor or the recipient are then available for trading on the Ecocash Platform in the foreign currency market. In effect, the delays allow a certain person, who was the subject matter of an investigation, to buy and sell foreign currency in the intervening period.”
“How can an entity or individual have an overdraft on an electronic payment platform such as Ecocash?”
“Applicant has failed to proffer an explanation and is challenged to do so under oath.”
“The applicant can only operate the payment systems in a lawful way. Operating the payment systems unlawfully through a Ponzi Scheme and shadow banking amounts to a violation of the law and does not give rise to any rights that the applicant can seek to enforce in the manner sought.”
Mangudya also argued that there is no risk of any irreparable harm being done to EcoCash.
“It is telling that the applicant has not been candid with this Honourable Court by setting out in detail the so-called affected agents, their identity and their KYC documentation. This is because the applicant has not been complying with the law and is unable to produce this information. Without the information, the applicant has not made out a case for an interdict.
“The Applicant, through this application shows that it is abdicating its responsibility of ensuring that its system and its identified agents operate in terms of the law. This is a blatant display of arrogance, defiance and impunity.”
To date mobile money mobile transactions have been largely suppressed and limited by daily and mothy transactions, coupled with high transactional charges, discouraging millions from continuously using the platform.
The regulatory intervention has caused serious damage to the mobile money sector, if not the worst, the inevitable, slow and painful death of what used to be the most promising fintech sector in Zimbabwe.