Zim’s bumpy road to cashless future

Source: Zim’s bumpy road to cashless future – Newzimbabwe 20/05/2016

HARARE: So, do you have a swipe machine here, we asked the lady who had just served us sadza, rice mashed with peanut-butter and pork bones at our favourite restaurant.

“Not yet, soon”, came the polite reply.

A while later, in a busy downtown supermarket, same question, and a less polite reply: “We don’t take cards here; cash.”

Cash is short, and there is no real short-term solution in sight. So Reserve Bank of Zimbabwe governor John Mangudya wants Zimbabweans to switch to electronic money. But the road to a cashless future is littered with high charges, distrust of banks, poor infrastructure, and a people that simply want money they can see.

Mangudya wants 80 percent of all transactions to be electronic within five years, easing our reliance on hard cash. So, I tried to live without using cash for a few days, just mobile money and a card. What better way to show solidarity with the embattled governor, and to test how ready we are for a cashless society.

Well, it didn’t take long to realise we still have a lot to do. Government offices still demand cash, and just try whipping out your bank card when you are in front of an impatient month-end or back-to-school supermarket queue.

Where better to start my cashless experiment, than at a government agency, I thought.

I needed to replace the “third number plate” for my car, which meant a $35 fee at the Central Vehicle Registry (CVR). In a small, sweaty room, heaving with loud car dealer types, I asked the lady behind the glass window: “Do you have a swipe machine?” She shouted “next”, and rudely told me to bring out cash or step aside. “EcoCash?” I said cash, she shot back.

So, the day was still young and I was already losing my cashless challenge. No POS at the passport office or the Zesa office either.The latter has a mobile option though, which helps. But go in there and they shake you down for cash. Cash at Zinara too.

Verdict one: The government itself is not actively driving for plastic money.What hope for Mangudya, when even the government itself has no interest in plastic money?

So, leaving CVR, it was off to the bank. Lucky break, the bank was giving out $500 to each customer. It came in $5 notes, but these are hard times. One has to be grateful even for this grubby wad of grubby notes. Seconds later, the SMS buzzes: I have just been charged $7,50 for that withdrawal.

That is like 15 kombi fares, two working weeks’ worth of kombi fare! Eight loaves of bread. Seven-and-a-half Chibiku Supas. It is a real fortune.

With banks limiting lending, their core business, they are relying more and more on fees and charges to grow revenue. The non-interest income column on bank earnings report is fatter than their interest income column.

Verdict two: High bank charges, another reason why Mangudya’s cashless future is still light years away. How ready are banks to lower their charges when they have become their biggest earner?

And soon I am driving back to the office and I am low on fuel. At Total Avondale, I ask again: “Do you have a swipe machine here?” No, the guy says, just our Total top up cards. I stop at three more service stations, Puma, Zuva, and another Total. No cards. At the fourth, Engen in the CBD, I finally give up and part with some of my precious $5 notes for diesel.

Verdict three: Most petrol stations prefer their own top-up cards, not bank cards. Kombi crews, who have a big say in what financial product works or fails, would never have the patience. They use cash, which is while mobile money for commuter fares didn’t fly.

Days later, after a few rounds at the pub, we asked for the swipe machine. The first one didn’t work, returning some error code. The second one did, to cheers all round. A friend tried his mobile money cash card, and it was offline.

Verdict four: Swipe machines are still like casino machines. It’s a gamble, sometimes they work, many times they don’t. That discourages use.

By the time, the next morning, I had to use cash to pay for parking in the CBD, I had long given up on my challenge. The final verdict was one can’t live on cards alone, and it will be a long while until that changes.

Mangudya says he has “announced that all retailers, wholesalers, businesses, local authorities, utilities, schools, universities, colleges, service stations and the informal sector are required to install point-of-sale machines.”

In December, Zimbabwe had 16,300 point of sale terminals. Zimbabweans spent $426 million through POS terminals during the same quarter, which includes the traditionally busy Christmas period. The number of POS machines in Zimbabwe may be more now, since the December report is the latest available data. Steward Bank alone, in its ads, claims to have 10,000 of its own POS machines.  However, cash still makes up 80 percent of all transactions.

However, it will take much more than Mangudya ordering POS installations. It will take a major culture shift, a return of confidence in banks. And, until it is possible to pay for all your main bills, buy sadza, pay for groceries at downtown supermarkets, or pay police fines by card, it is unlikely we will become a cashless society soon, not even 80 percent in five years.

Retailers, especially independent stores serving the lower end of the market, buy stock using cash, and their customers too do not use cards. Confederation of Zimbabwe Retailers president Denford Mutashu was quoted recently as saying it was taking too long for retailers to access cash from card-based transactions. The financial system is still too inefficient to give them confidence.

For people to use cards, they first have to run bank accounts. This is still unattractive to many, for many reasons. Firstly, we still remember a time when you earned interest on your deposit, and not lost all of it down the black hole of bank charges. Secondly, many still have memories of losing all their savings, first to bank failures and then to the currency switchover. Thirdly, and most importantly, to use a card, you need to actually have money to keep in the bank in the first place.

Not everyone sees a bank account as a convenience. When it was ordered that tobacco farmers be paid via bank accounts, they rioted. Banks accounts are still seen as elitist, an inconvenience, unsafe and unfair.

When a friend praised our pork bones restaurant, and I told him “but they have no POS machines,” he called me “fancy pants.”

He is right. Mangudya’s cashless society will be hard to reach, until the card is mass market, cheap, and efficient. Until then, it is for fancy pants and cash will remain king. And in short supply.