With recent news of Government’s attempt to ban EcoCash and all mobile money platforms, I got to thinking. How many times has the government and financial authorities shifted the goalposts regarding what our problem really is?
In 2018 what had been a steady decline turned into the opening of flood gates and since then the RBZ, the President and at times other institutions linked to the government have taken turns to point fingers at what it is that is behind foreign currency manipulation. Here’s a timeline;
October 2018 – Mangudya says influential people behind black market
Two months after the election of President Mnangagwa, it started. The Reserve Bank governor came out and said the following:
These are influential people with access to huge sums of cash. It has been discovered that one character has been pushing onto the black market as much as $48 million in foreign currency. This person has access to cash and it is difficult to understand how this could have happened without the knowledge of the CIO, the FIU, the police as well as the commercial bank.John Mangudya – Reserve Bank Governor
It seems the Reserve Bank governor actually knew who the person in question was and in fact promised that something would happen to this individual;
The meeting called by the President could trigger a nasty fall-out and there is already gnashing of teeth. Some people have a lot of explaining to do and heads will roll…
Fast forward 2 years later, we are still waiting for heads to roll and for the people with explaining to do so. This was the first of many such insincere proclamations from the RBZ, as we’ll see.
16 September 2019 – ZACC investigates EcoCash agents for selling cash
Zimbabwe’s Anti-Corruption Commission (ZACC) started an investigation into agents stating that they were concerned by their activity and the negative impact it had on foreign exchange rates;
We are concerned about the volumes of isolated of reports we have received in connection @EcoCashZW agents manipulating the cash ecosystem to their unfair advantage by selling cash & at prohibiting rates. We are aware that this practice is enabled & supported at a systematic level.ZACC
This was the first of many occassions in which EcoCash would go under the microscope in relation to the forex rates.
17 September 2019 – RBZ says they don’t have all control of foreign currency and thus can’t control the black market
Deputy Governor at the Central bank came with a different angle as to why the parallel market continued to be a problem;
The existence of a parallel market is a reflection of shortages in the system or the wrong incentives in the system.
Clearly we have to fix that and deal with that (black) market and the best way to deal with that is to make sure the interbank rate is sufficiently priced and there is always sufficient foreign currency.
The only way we can control those kinds of markets where there is a parallel market is when the central bank had control of all the foreign currency in the system.
As things stand, we don’t have control of all the foreign currency in the system. A lot of it is outside our powers or purview and we have no way of knowing where it ends.Kupukile Mlambo
As we have become accustomed to hearing, it was not the Reserve Bank that was at fault. Nothing new here.
21 September 2019 – Bureau De Change operations “refined” by RBZ
Bureau De Changes had been operating sub-optimally if we are to take the RBZs word and thus a host of measures were introduced in hopes of slowing down the devaluing of local currency These measures included limiting the amount of forex people could buy from Bureau De Changes and limiting sell of forex by Bureau De Changes to people travelling only.
Not much changed in regard to the trajectory of the ZW$ – it continued in free fall.
22 September 2019 – Sakunda, Croco Motors and Access Finance accounts frozen
The RBZ came out said the accounts of these companies had been suspended pending investigation. The President’s statement on this issue was more telling and he suggested that the companies were behind the spike;
On the monetary side, yes, we introduced the one currency. For six or eight weeks, it remained stable, but then our people are very intelligent. We have people who find ways to fight that and undermine (the currency), but yesterday we also became smarter than their being smart, so we took some action.President Emmerson Mnangagwa speaking after the freezing of accounts
The result of that investigation was never publicised and eventually all companies got access to their accounts and life went on.
25 January 2020 – RBZ freezes accounts of forex rate manipulator China Nanchang
The RBZ issued out a statement to the effect that a company which had injected money into the black market had their accounts frozen;
The RBZ escalated the matter to the Financial Intelligence Unit (FIU) for investigation and the FIU has so far identified one entity (China Nanchang). which has used its bank accounts to inject millions of dollars into the parallel market in the last few days.
The FIU has ordered the freezing of the identified account pending further analysis and is undertaking ongoing surveillance to identify more culprits involved in the paralled market transactions, particularly on the EcoCash platform.
Whether or not the further analysis took place is not clear. We just know that the RBZ and its officials did not make public reference to this incident again after this announcement – at least as far as I can see.
In fact the most recent report to do with this very same company states that the company received US$1 million back in 2014 meant for the 2014 African Union Sports Council Region Five Youth Games in Bulawayo. The funds were reportedly diverted after the Ministry of Finance issued out a directive that the money be used for construction of two dams instead. The dams were never built, the money not repaid, you know how the story goes.
Anyway, I digress – that was just to illustrate Nanchang’s proximity to the government. Let’s move on shall we.
15 March 2020 – Mthuli Ncube suspends ‘trade’ of Old Mutual, PPC And Seedco shares to kill black market
On this fateful day, fungibility of shares was suspended. Fungibility of shares allowed people investing in Old Mutual, PPC and Seedco shares to buy shares locally and dispose of them on the foreign stock exchanges these companies are also listed on. People were buying shares locally and then disposing of them on foreign exchanges and thus exchanging local currency for foreign currency.
This was the first time Old Mutual would come under the microscope and not the last. This too failed to stop the currency devaluation.
2 May 2020 – RBZ Freezes accounts of mobile money agent lines because they are manipulating the rates
The Central Bank directed mobile money platforms to ban agent lines who were allegedly manipulating the rate;
You are directed to identify all accounts of the listed persons/entities that are linked either to Ecocash or to One Money (i.e. accounts that allow the customer to move funds between the bank account and the mobile money wallet, and/or vice versa) and to, immediately freeze such accounts.
This was effected and resulted in a court battle between EcoCash and the Central Bank and that too is yet to be resolved. Despite EcoCash banning the agents and placing new limits for transactions that too hasn’t slowed down the rate.
The central bank again issued a directive that forced ZIPIT to place transaction limits similar to the ones that had been forced upon EcoCash. This too was meant to limit the amounts moved and volumes traded by money changers. Maybe the volumes have reduced but even if they have that has not translated to the ZW$ strengthening against the US$.
Confronting the wrong problem
The recent announcement by the Ministry of Information seeking to ban mobile money with immediate effect, is just the culmination of the blame game. Yes the black market is a problem and authorities must try put an end to it. What won’t work is trying to put an end to the black market without fixing the main problems or corruption and disappearing money in Zimbabwean bank accounts. The black market is a symptom of the real problem.
Without addressing the real issues plaguing Zimbabwe we will keep going in circles. Fun fact, a colleague of mine sent me an article that shows how we are in the same place we were 14 years ago. The Reserve Bank Governor back then, Gideon Gono, banned 16 money transfer agencies from operating in Zimbabwe because… You guessed it, they were dealing on the black market. Ahyas…