Econet explains why the new EcoCash tariffs are cheaper overall

When we first posted the announcement of the EcoCash Tariff review by Econet a few days ago, we noted that small amounts, that is most value ranges below $50, had actually become more expensive, while the larger amounts are significantly cheaper. We also noted that without knowing the average value (or most popular statistical mode of transaction value) of EcoCash it’s difficult to assess if the review is a tariff drop overall or not.

So we contacted Econet Services CEO, Darlington Mandivenga, to get this data. Unfortunately he wouldn’t provide any specific data in response to our questions, only mentioning in a very vague statement that the most popular band of transactions is the 100 to 200 range. Here’s part of the response:

The lower value transactions you refer to account for less than 50% of the transactions. In this market the money is flowing from the urbanites (employed) to the ruralites (dependents).The most popular band is the $100 – $200 which alone accounts for more than 30% of the transactions. As you will note from the new tariffs, a $1.05 reduction has been effected for sending money in this band. In addition, the cash out fee for this band has been reduced by $2.10. The total saving for a cash in, send money and cash out for the most popular band is $3.15, down to $6.85 from $10.00. These are significant reductions and the users of EcoCash will be extremely excited about this development. Consider also the cash out reduction for $200  from $6 to just $3.90, a $2.10 reduction! Numbers do not lie!

When we got an opportunity to speak to him eventually this week, he and new EcoCash CEO, Cuthbert Tembedza, explained that they couldn’t go into specifics stats because they are in their annual results closing period. They also explained that the review is really a numbers game and not  something spurred by the fast approaching deadline from the Reserve Bank of Zimbabwe to review the tariffs. “The volume of transactions has increased significantly and as volumes increase, we will always review the tariffs downwards” said Mandivenga.

In his email to us Mandivenga also said that EcoCash Agents are critical to the success of the service. “The commission structure is designed to attract quality Agents to ensure improved liquidity, fiscal velocity and motivated customer service. The overall effect [of the tariff review] on Agent commissions is that it remains attractive with notable commission increases up to above 70% of the fees in the upper bands.”

Mandivenga also explained their move from the linear percentage based tariffs to the banded model:

some of the lower bands of the band will pay marginally higher whilst the upper band now pays lower. The overall effect is a significant tariff reduction across the board. Although we have reviewed our tariffs downwards, our costs remain unchanged. For example, the minimum cost to us per transaction is $0.50 before VAT and Agent Fees. The business has taken a conscious decision to subsidize transactions in the lower band as we promote financial inclusion. You are obviously aware that the minimum charges levied by other services that can be considered alternatives range from a minimum of $0.20 to as high as $2.50. At, $0.09 the minimum charge for EcoCash is the lowest available on the market. Cashing in and registration is free although there is a cost to EcoCash for offering this service