Today we were in attendance as Steward Bank launched Kwenga, an affordable and portable Point Of Sale (POS) machine for the masses. Also in attendance was the Deputy Minister of Finance and Economic Planning, Mr Terrence Mukupe.
Steward Bank CEO, Lance Mambondiani was understandably all smiles as he unveiled the Kwenga, or Kwengas to be accurate. Kwenga is one heck of a product. The cheaper Kwenga costs just $35 but requires the user to have a smartphone. At cost most of the small businesses in Zimbabwe can afford a POS machine of their own.
Mambondiani announced that the bank will not be charging anything for transactions less than a dollar. That would mean if one was to swipe for their kombi fare (50c) or to buy a loaf of bread (70c to $1) they won’t have to pay for that transaction. As you know, bank charges are the biggest reason most of those who resist the cashless life do so.
Now if those small transactions we make every single day can be done free of charge, you can see more and more people not bothering to queue up at banks to get cash.
At the Kwenga launch, present were some fine folks from Pamushana, a transport company which partnered with Steward Bank to pilot the Kwenga devices. I talked to the conductor and he told me that people had warmed up to the idea of swiping for their kombi fare and some would actually wait for the Pamushana kombis in search of the convenience swipe brings.
The cost to not charging for the $1 transactions
This is all well and good but Mambondiani let us all in on one fact which complicated the whole thing. The government levies a tax of 5c on those transactions less than $1. That means Steward Bank, despite letting us Kwenga for free for transactions less than $1, would still have to pay the government 5c per transaction. That would mean a heavy cost for Steward Bank to bear as I’m sure there will be a huge number of those $1 transactions.
Mambondiani then pleaded with Deputy Finance Minister Mukupe to look into removing the 5c tax on $1 transactions. Minister Mukupe responded when he gave his speech and said the government will surely be looking at it. He went further to say the affordable Kwengas should actually be free and said the bank should sit with the government to see what can be done about.
I’m not going to lie to you. Sitting there, listening to the deputy minister I thought, ‘we’ve been hit by, we’ve been struck by a smooth politician.’ I thought that was the end of the story and Steward Bank would have to bear that 5c tax.
There I was just a few hours after the launch, minding my business and scrolling them tweets when I came across this,
We have removed the tax for any transaction below $10!!!
— Hon Terence Mukupe (@tmukupe) January 25, 2018
Mambondiani had asked for the 5c tax on $1 transactions to be scrapped but the government took it to another level. There will be no tax for transactions below $10. The government really is trying to promote the ‘cashless society.’ No tax on the $10 transactions should see even the bank charges on those $1.01-10 transactions decrease. Just like we saw when duty on fuel was reduced, the final consumer should see a price decrease.
We are not sure when the tax reduction will be effective but considering the 100 day target the government set for itself I would assume if not immediately, it will be effective within the week.
[We now have more information: the government has announced that the tax reduction will be with immediate effect. The Finance Act has been amended thus:
Section 22B of Chap 23:04, ‘automated financial transactions tax’ of the Finance Act [Chapter 23: 04] is amended by the deletion of “for each transaction on which the tax is payable” and the substitution of “for each transaction exceeding Ten United States dollars on which the tax is payable.
Section 22G (Intermediated money transfer tax) of the Finance Act [Chapter 23:04] is amended by the deletion of “for each transaction on which the tax is payable and the transaction is exceeding Ten United States dollars on which the tax is payable.]
Good move but…
It’s an exciting move but we know it means reduced revenue for the government, in the short term at least. This may be a bad thing if you consider that the government’s expenditure already tops revenue and moves like this one and the reduction in fuel duty further eat into the already inadequate revenue.
Having said that, the hope is that these pro-business tax reductions should promote production and attract investment and actually lead to better tax revenue collections for the government in the mid-term.
Let us know what you think about all this in the comments below.