Exchange Rate Problem Is Due To RBZ Not Being In Control When Agents Move Money, Says Mangudya

It’s been a scandalous month for the Reserve Bank and mobile money service providers with EcoCash at the centre of the Central Bank’s dart board.

Background…

The economy has been spiralling wildly and the Reserve Bank believes the fault lies with mobile money services. This thinking is what led the Central Bank to issue out a directive that forces mobile money platforms to limit agent transaction to 100k/month.

EcoCash fought back and said that the 100k threshold was insignificant and would result in the incapacitation of thousands of agents which by extension would threaten the economy and livelihoods of ordinary Zimbabweans.

RBZ and FIU doubled down – choosing to fine EcoCash and Cassava Smartech officials for i) disclosing information they were not supposed to, ii) failing to comply with the initial directive, iii) failing to provide KYC details when asked to do so and iv) failure to report suspicious transactions.

Last week, Mangudya then went on an “interesting rant” saying there is economic warfare and every time the government does something to fix things there is “asymmetric economi warfare” – EcoCash and agents usuing it contributing to that issue.

What now?

Yesterday Mangudya was back on wax speaking about mobile money and as ever he had some interesting things to say:

The platforms traders are not supervised by the RBZ because we only monitor banks.
So, from the time the money leaves the bank into these agent lines, we lose oversight and in the process, most shocks causing the rates to jump are emanating from these platforms [mobile money platforms], hence the plans to bring them under scrutiny.
John Mangudya – RBZ Governor

So Mangudya says the RBZ will continue to monitor mobile money platforms pretty closely which in and of itself is not necessarily a bad thing. Important to note however is the fact that since the directive placing a threshold on agents was effected rates have not slowed down. One could argue that the opposite has happened.

Whilst EcoCash is not a bed of roses suggesting that it is behind the devaluation of the Zimbabwean dollar is clutching at straws in my humble opinion.

It’s time for a switch…

The fact that Mangudya alluded to the RBZ not being in control as probably his way of preparing the nation for the national switch that is in dveelopment.

The way I see it, the RBZ governor has said that the problem is that they don’t have full access and when the national switch is announced/launched one of the highlighted features will be the fact that authorities will be able to monitor everything with this new switch.

A dash of hypocrisy

Mangudya also hit out at currency dealers for dictating currency exchange rates randomly. This is laughable since on 3 separate occasions the Central Bank has also dictated exchange rates – first setting the USD-Bond rate at 1:1 and then subsequently to 1:3 and most recently 1:25.

All these rates are not a true reflection of the rate and the RBZ has admitted as much before. When the RBZ and Ministry of Finance launched the Reuters Interbank platform in March the two authorities stated the following:

This platform will allow foreign exchange to be traded freely amongst the banks and permit a true market exchange rate to be determined.

Two weeks after saying this the RBZ hit a u-turn and said the exchange rate would now be placed at 1:25 as part of COVID-19 response measures. This ultimately leaves the question who are the real economic saboteurs? Mobile money agents or the Central Bank?