Towards the end of August Ecocash reported that they had since shut down at least 1000 Ecocash agent lines. This was done after having investigated illicit dealings that had been done through those agent lines involving the overcharging of rates for cash-outs. The issue of selling cash has been and still is a heavily debated subject with so many opinions being aired by the public. There has been a general outrage against Ecocash as being the sole cause of the cash selling problem but it is not as simple as that. There are so many angles to look at this issue from and in this article I will touch on some interesting sentiments from the public.
Must Ecocash Admit That They Are Also Responsible For This Prevailing Problem?
Recently Strive Masiyiwa expressed his sentiments regarding the Ecocash agents’ debacle through his Facebook page. He highlighted that Ecocash is not a currency – that it is simply a mechanism that money moves through. He pointed out that the cash in question belongs to the agents. He also underscored that Ecocash does not print money either physical or electronic. He said that it is the reserve of the central bank to supply and ensure there are enough banknotes in circulation. He also posed a question where he asked, ‘How does Econet police 50000 agents?’
From all these remarks it is apparent there some sense in them but most people are having problems with his tone of sounding like Ecocash does not share in the blame. Some people have been saying that Ecocash is responsible somehow because these agents work under them. Thus based on that arrangement Ecocash should also be held to account. Some people even feel that Ecocash is being insincere because the overcharging that is being done for cash-outs actually benefits them big time.
A lot of people are saying Ecocash has to be blamed also; imagine that some people are now making huge amounts of money without any form of production. For instance, you have ZWL$100 in Ecocash and you can only get about half of that because maybe the rate is at 50%. Some are arguing that the agents buy their cash on the parallel market so they have no choice but to charge such rates in order to realize profits. That is why at the end of the day Ecocash seems defiant that they are not the problem, to begin with. Though some feel that both the central bank and Ecocash must have by now jointly come up with a way to police and address the challenge.
Should The Central Bank Print More Cash?
Under normal circumstances, people should get cash from banks of which those banks should get their cash from the central bank. This brings us back to the point that the central bank should print more banknotes to allay the cash shortages currently being experienced. Of course, there are always fears of pushing inflation up by printing more money but someone suggested an ingenious framework. The central bank gets to print more banknotes but they do not necessarily add to the current money supply per se. Rather, banks get the cash in exchange for their RTGS balances with the central bank. Depositors then can access cash for their RTGS balances and the cycle goes on like that. Since it is apparent that the central bank is reluctant to print enough cash to supply the market it seems there are possible reasons why. Here is some of what people have had to say regarding those possible reasons:
The Infamous 2% Intermediated Money Transfer Tax (IMTT)
The success of the 2% tax heavily relies on the widespread use of electronic transactions to conduct business. If cash becomes readily available people will not have to do as many electronic transactions as now. Actually the cash shortages seem to have been promoted to force people to do electronic transactions more. The more those electronic transactions are done the more 2% tax can be collected by the central bank.
The Relief Might Be Short-Term
Some people feel that even if the central bank were to print more cash right now the relief would be short-lived. This rationale behind this is that locally people do not have a keen interest in electronic money. Coupled with the 2% tax there is a general lack of confidence in the banking system and also the local currency. So printing more cash will simply keep its demand high since people would rather prefer to do cash transactions. Cash transactions involve less or zero charges plus they eliminate the 2% tax. Another issue is that when cash is made more available players on the parallel market will horde it to create artificial shortages so as to increase its value (which keeps tumbling). Someone even suggested that printing more money might offer relief for at most just 3 months after which things will go downhill again.
The bottom line is that there are multiple factors leading to the selling of cash. The biggest challenge in Zimbabwe is that the fundamentals of sound economic and monetary policy are not being upheld. We still have an economy that is largely an importer because there are seriously low levels of production. We have a porous and questionable local currency whose adoption came under a series of debatable circumstances. The nation is always characterised by several statutory instruments and there is of course unchecked government expenditure. If these and more fundamental aspects are not addressed then cash selling will always stick around. The sad thing being that blaming Ecocash will not really solve anything. Actually if it were not for Ecocash the local situation could have even been worse off than it is.