'Zim not ready for cashless economy'

HARARE - “Please try one more time,” Douglas Mandebvu whispered to the till attendant.

“I am sorry sir, you will have to try again tomorrow,” the attendant said with slight irritation in her voice glancing at the long-winding queue after swiping Mandebvu’s card for the sixth time as it was declined at the Point-of-Sale (Pos) machine.

Embarrassed by the episode, Douglas glanced at the piles of grocery in his trolley cart before striding out of the supermarket.

This is an embarrassing situation millions of Zimbabweans know all too well, as most suffer every day when purchasing goods at retail outlets across the country, due to constant financial service systems malfunctioning.

After enduring months of a biting liquidity and cash crunch — with the central bank vociferously pushing for citizens to embrace plastic money — the question of the day remains anchored on the country’s ability to handle the pressures that come with a cashless economy.

A cashless economy is an environment where purchases of goods and services are made electronically with minimum use of cash.

This normally results in electronic currency which comes in various forms, for instance Internet banking, mobile banking and the use of plastic money.

In southern Africa, there has been an undeniable trend towards a cashless society with South Africa taking the lead.

Comparatively, in Zimbabwe, competition for the adoption of the latest technology in the information communication technology sector has increased, albeit from a small base, since the introduction of multiple currencies.

However, the current cash crisis, which has resulted in some financial service institutions giving out cash withdrawals of $50 per individual, has seen the majority of Zimbabweans continuing to queue at banks daily to get their money despite having access to mobile phones and laptops.

POSB chief executive Admore Kandlela believes that while the infrastructure for a cashless society has been set up, depositors are not ready to embrace digital platforms for purchasing purposes.

“We have made low-cost cards which we have given to people — especially pensioners — but you still see them coming to queue the next day. If you ask them why, they tell you they want to see their colleagues and discuss issues, most of them are war veterans,” he said.

Kandlela noted that the non-adoption of plastic money was mostly due to socialisation as most people prefer to gather around and talk to each other instead of conducting business in their offices or homes.

Information and Communication Technology minister Supa Mandiwanzira said the cash crisis presents a perfect opportunity for Zimbabwe to adopt plastic money.

“Zimbabweans are an interesting lot. They wait for crises to embrace solutions.

“For instance, it only took the depreciation of the South African rand for them to embrace bond coins. Now I hope this cash crisis will spur them to accept plastic money as this is the solution we are looking for,” he said.

“Embracing electronic payment options will surely go a long way in reducing the reliance on cash businesses and individuals,” he added.

Economic experts say the benefits of a cashless society to the transacting public go beyond convenience and safety associated with the payment system.

“The present tight liquidity, cash shortages and the need for financial transparency can be solved through the adoption of plastic money as financial transactions can be completed without the involvement of tangible cash,” economic commentator Francis Mukora said.

“This also has the potential to contribute to gross domestic product (GDP) growth as the majority of the populace is brought into the banking system in addition to gaining reduced transaction costs,” he added.

Mukora noted that a significant percentage of GDP can be realised in the form of savings if Zimbabwe is able to shift from cash to an electronic-based transaction system.

“Mobile phones and other ICT applications can replace current dependency on brick and mortar structures in offering financial services to the general public.

“Pos Machines across retailers in Zimbabwe represent open banking halls for the public if there is full co-operation between retailers, network service providers and banking firms,” he said.

However, despite the aforementioned benefits, there has been a multitude of challenges to get into the full mode of paperless banking in Zimbabwe, for example the high growth of the informal sector.

While some bank executives have said they will not “waste” Pos infrastructure on the country’s growing informal sector, studies show that most of the country’s activity is taking place in this sector.

With the Bankers Association of Zimbabwe (Baz) estimating that about $7 billion is circulating in the informal sector — most of which is unbanked — market watchers contend banks need to put Pos infrastructure in informal trading areas for financial inclusivity.

Central bank statistics, however, indicate that the country’s unbanked money is approximately $3,3 billion.

“It does not make sense for big shot executives to say they do not target the informal sector because that is where the money is circulating. In Mbare, an average of $100 000 changes hands every day, so if they are not targeting this money who are they targeting?” Harare-based economist Issis Mwale said.

The total number of Pos terminals has increased from 17 069 recorded at the end of March 2016 to a current figure of 20 000 as the central bank struggles to introduce the right infrastructure for plastic money transactions.

Reserve Bank of Zimbabwe’s director of National Payments, Josephat Mutepfa, is on record saying the growth has been influenced by the cash crisis in Zimbabwe.

At the end of June 2015, Zimbabwe had 15 908 Pos terminals a number which increased to 16 363 by the end of December 2015.

As the liquidity situation in the economy worsens, service providers have been forced to introduce payment alternatives that accommodate customers using mobile money and card services.

This has also been complemented by the introduction of debit card alternatives that cater for various client segments.

However, the installation of Pos infrastructure has been hampered by the costs involved in importing the hardware.

To promote the use of plastic money, the central bank has also compelled banks to slash Automated Teller Machines (ATMs) charges from around $4 to $2,50. Pos machine charges are now $0,10 for purchases of $10 and below with those more than $10 fetching a $0,45 fee.

Real Time Gross Settlement transfers have also dropped from $10 to $5 per transaction; Electronic fund transfer (Zippit) will now cost $0,33c and $2,10.

User charges for Pos services have also been scrapped; service commissions for merchants will not exceed one percent for local transactions and monthly charges will be $5.

Though plastic money is being encouraged, many companies do not have point of sale machines, with most informal traders in the country’s cities stating they will not be applying for the service as they do not even have bank accounts.

But, many companies have mobile transfer facilities like Econet Wireless Zimbabwe’s mobile money service Ecocash.

In the full year to December 31, Ecocash reported its transactions had breached the $6 billion mark since it was introduced.

So, if someone has a bank account linked to such a service, it would make plastic money transactions a reality.

Finance minister Patrick Chinamasa is on record saying government will invest millions of dollars in digital and mobile money platforms in a move aimed at making Zimbabwe a cashless society, adding that by 2020 Treasury wants 90 percent of local transactions to be plastic money-based.

This comes as RBZ Governor John Mangudya has made it clear that all local service providers need to get Pos infrastructure, adding failure to comply will force government to introduce a legislative piece compelling service providers to introduce in infrastructure.

However, most Pos hardware is concentrated in urban areas, mainly Harare and Bulawayo.

After the hyperinflationary period of 2008/9 many Zimbabweans shunned the system when their monies were devalued and locked in banks. After that, many became distrustful and opted not to use the formal channels altogether.

“At this moment, government needs to do something to instil confidence in locals if this plastic money movement is to take off,” another economist John Robertson said.

Comments (2)


1111111 - 8 August 2016

Technology is good but the consumer has a right to choose. Without educating the consumer on th latest technologies it will take a long time for them to embrace these cashless techs. It's difficult to use these cashless techs in a corrupt environment .....people afraid to lose their money

Dhewa - 14 August 2016

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