It seems that Zimbabwe’s central bank keeps tracing the source of the country’s monetary woes back to the local electronic payment systems. Ecocash, being the largest of these, usually bears the full brunt of the RBZ’s fury and is often left to fend off the reserve bank on its own. It happened last year when the bank banned facilities like cashback and cash out which are used by the users of these platforms to redeem their electronic balances as physical currency. Ecocash responded by practically holding their opponent (and consequently their own users) at ransom by declaring that the cash-out facility is an integral part of their platform so tempering with it will compromise the whole system (or something else along those lines).
Fast forward to early this month (May 2020) the RBZ again took a swing at mobile money platforms—this time at agents who have transactions which exceed 100 000ZWL per month. Ecocash once again cried foul and took what seemed like a reasonable appeal against the RBZ’s decision to the courts. Unfortunately for the country’s mobile money giant, this time the central bank was ready. The RBZ responded to Ecocash’s court challenge by accusing the latter of a number of transgressions which have been the subject of much debate ever since.
Not to be left out, I will also join the fray but with the full acknowledgement that I have only limited information (like everyone else) and will thus only limit myself to analysing and expounding on the stated accusations instead of speculating as has become the order of the day.
Agents are overdrawing on the platform
The latest round of the central bank’s bout of accusations against the mobile money service is centred around the alleged existence of an overdraft facility on the platform which has allowed some agents to draw out a total of 39 million ZWL. The alarming part is that Ecocash, apparently, is unable to explain the existence of this overdraft facility. You should take that last point with a little grain of salt since it is entirely based on what the governor of the RBZ said.
Why it would be illegal
Ecocash is not a bank so understandably it is not allowed to offer such overdraft facilities to anyone. Specifically because they are not banks, mobile money services have backing bank accounts which should contain each and every cent which is on these platforms.
What it all means
Here the RBZ is basically accusing Ecocash of “creating” money on the platform. If the total money on the Ecocash platform—as represented by total user balances—exceeds that which is in the aforementioned backing bank account, this would then mean that this excess money is effectively fake/counterfeit money. Increasing or reducing money supply is the sacred duty of a country’s central bank as this usually has very serious consequences. Increasing the money supply generally devalues currency that is why money counterfeiters never get commendations for “wealth creation”.
Unlike in previous cases where the platform was merely targeted by the reserve bank as a site of criminal activity this time around Ecocash is actually being accused of being complicit or actually orchestrating the criminal activity on its own platform. If this is true at all we should expect to see far more head rolling than just freezing of some SIM cards.
Ecocash does not immediately settle payments
The RBZ governor further pointed out the apparently peculiar fact that Ecocash does not immediately settle vendor and merchant payments. As someone who does not own a merchant line, I cannot attest as to the speed of such settlements.
Is this illegal?
From what the governor said, there does not appear to be anything particularly illegal about this alleged practice. He shared this, rather, to support a theory of how the money which is in limbo can be used to buy forex on the black market by a certain individual or group of individuals who have access to these funds during the intervening period.
How the alleged crime is committed
Forex trading involves not only buying and selling currency but also gaining profits from the process. So, in theory, if someone had control of all this money while it was in transit, they can buy, sell and then pocket the profit several times over before the money reaches its intended destination.
Illicit trade in foreign currency
The RBZ caps off each and every one of its accusations with the suggestion that all these ill-gotten funds are used to buy or trade foreign currency on the black market and thus fuel inflation of the local currency on the EcoCash platform.
The charges which the RBZ has brought against EcoCash are severe enough to warrant closer oversight and regulation of mobile money platforms if any of them are proved to be true. On the other hand, if these charges end up amounting to nothing, this would go further to prove our central bank has no clue on how to tame the rampant inflation and has instead chosen to dedicate its energies and resources to finding scapegoats.