The Zimbabwean economy seems to go from bad to worse, as authorities leave behind a trail of policy missteps.
The government announced late on Friday that monetary transactions on mobile-based money platforms are suspended, potentially impacting up to 80% to 90% of all transactions.
This unprecedented move leaves Zimbabweans stranded with almost no mode of transacting. Residents with money stored in any of these mobile providers need to visit a local bank to liquidate their accounts.
The most prominent players in the industry include EcoCash, One Money, MyCash, and Telecash. EcoCash is the biggest non-banking financial institution and holds no less than ZWL$8bn on its mobile money platform.
In a statement following the announcement, the company urged its 10 million users, most of whom do not have bank accounts, to remain calm.
The government is accusing mobile money providers of economic sabotage and malpractice, which have led to the creation of a parallel central bank.
The government’s animosity towards non-banking financial institutions is nothing new.
Reserve Bank of Zimbabwe (RBZ) Governor John Mangudya voiced his support for the government and issued a monetary policy statement over the weekend specifying revised conditions to the ban.
“The unprecedented measures have been necessitated by the need to protect consumers on mobile money platforms which are being abused by unscrupulous and unpartisan individuals and entities to create instability and inefficiencies in the economy,” the statement read.
Meanwhile, trade on the Zimbabwe Stock Exchange (ZSE) is also suspended and investors are frantic and deeply concerned over what has happened to their money.
This is a blow for Zimbabweans who usually turn to the local bourse to safeguard the value of their money against rising inflation and currency depreciation.
Yet not long ago, officials were still upbeat about the Victoria Falls Stock Exchange (VFEX) and the foreign investment it would unlock.
On Tuesday, June 30, the RBZ proceeded to hold the second weekly foreign exchange (FX) auction.
Last week saw Zimbabwe’s currency peg to the US dollar end after the weighted-average rate was calculated at ZWL$57.4/$, thereby setting the new exchange rate. At the latest auction, this rate was calculated at ZWL$63.7/$.
The Zimbabwean dollar has been in freefall since the start of the year as a lack of confidence erodes its value. We believe this trend is likely to persist while foreign exchange reserves remain at distressingly low levels.
The latest move is simply another desperate attempt to enforce the use of a currency with no credibility.
We have stated before that the economy is in a state of dysfunction, characterised by irrational policy measures.
The banning of mobile money services further exacerbates confusion and turmoil in Zimbabwe’s monetary environment.
Jee-A Van Der Linde, Economist