Reserve Bank of Zimbabwe swoops on unbanked businesses

Langton Nyakwenda

The Reserve Bank of Zimbabwe has assembled a crack team to compel all businesses to bank their money in line with a strategy

Source: Reserve Bank of Zimbabwe swoops on unbanked businesses | The Sunday Mail June 6, 2016

Langton Nyakwenda

The Reserve Bank of Zimbabwe has assembled a crack team to compel all businesses to bank their money in line with a strategy to enhance cash circulation in the formal system.

Point of sale and Real Time Gross Settlement charges will soon be reduced to encourage cashless transactions, while banks will be greatly involved in promoting the use of multiple currencies.

In addition, the central bank will import at least US$10 million weekly and enforce the Bank Use Promotion and Suppression of Money Laundering Act.

Zimbabwe has been battling to end cash shortages that began in April 2016 on the back of illicit financial flows, a huge trade deficit and the lack of a savings culture.

Bond notes worth US$200 million will be introduced around October to help ease the situation, although quick-win strategies are already being pursued.

Authorities reason that unbanked businesses are partly to blame for constipated money circulation as they mop up cash from customers but do not inject it back into formal channels.

Now, a crack unit has been assigned to swoop on them to check compliance with banking laws, and shut down unruly establishments.

The small and medium enterprises sector — which reportedly has US$7 billion-plus and is predominantly unbanked — will not be spared.

Section 11 of the Bank Use Promotion and Suppression of Money Laundering Act (Chapter 24) requires all traders and parastatals to bank their money at the close of business.

It reads, “(1) Every trader, and parastatal shall, unless it has good cause for not doing so, deposit in an account with a financial institution no later than the close of normal business hours on the day following that on which the cash is received or on the next banking day —

(a) cash that is surplus to the requirements of the trader or parastatal; or

(b) cash in excess of ten million dollars (or such other amount in excess of ten million dollars as the Minister may prescribe from time to time); whichever is the lesser amount.

  1. z) A trader or parastatal shall have the burden of proving, to the satisfaction of an inspector, police officer or any court, that it has good cause for not complying with subsection (1).”

RBZ Governor, Dr John Mangudya told The Sunday Mail that the special unit hit the field last Friday.

“The problem we have today is caused by non-circulation of money. Therefore, with immediate effect, we have put in place a team that will make sure all businesses are compelled to bank money.

“This includes any business, anyone who is into selling products, both informal and formal businesses. We are saying money should be banked. We are importing between US$10 million and US$15 million every week, but the problem is there is a short circuit in the circulation system.

“We are, therefore, taking the bull by the horns, and invoking the Bank Use Promotion and Suppression of Money Laundering Act which compels businesses to bank money.

“It is an offence not to bank money, and those caught on the wrong side (of the law) risk losing their licences or incurring huge penalties.”

Dr Mangudya advocated cashless transactions, revealing that the RBZ and financial institutions are discussing reducing bank and point of sale charges.

“Zimbabwe has a cash culture, we are overusing cash. The way forward is to go cashless.

“So, we have engaged banks and are persuading them to reduce charges on Real Time Gross Settlement and point of sale transactions.

“Why would you need cash if you can use your bank card to purchase whichever goods you want, or when you can transfer money into someone’s account?

“I know the prevailing charges are discouraging people from using plastic money, but within the coming two weeks, we will be announcing reduced charges on those transactions.”

He added: “There is also no harm in transacting with bank cheques. Let us also use the other currencies in the multi-currency basket; that is the South African rand and euros because we have overburdened the United States dollar.

“We want a win-win situation for everyone involved, we do not want long queues at banking halls.”

He also warned that the central bank would come down hard on retailers who are shortchanging customers by sticking two different price tags on one product.

“We know there are businesses that have two prices (for one product) — one for cash payment and another for plastic transactions.

“That should stop. We will also come down hard on those institutions selling cash at a premium,” he said.

COMMENTS

WORDPRESS: 12
  • comment-avatar
    Joe Cool 6 years ago

    Never heard of this Act, but it must be ultra vires the Constitution. Mangudya has become a financial harlot.

  • comment-avatar
    tonyme 6 years ago

    Kenya has already gone cashless. Can we learn something from them. The main ingredient is trustworthiness though. Can we trust each other in Zimbabwe?

  • comment-avatar
    R Judd 6 years ago

    ZANU has run out of other peoples money to steal. They figure this will improve their prospects

  • comment-avatar
    Sidu Gabula 6 years ago

    Banks are the ones that need to fomulate pricing that would drive customer behaviour to cashless banking. And take advantage of visa atm cards. They are accepted worldwide, online and banks are paid by visa if their customers swipe the cards on pos machine. They need to invest on those cards. People would swipe for free and banks get paid by visa for every swipe.

    • comment-avatar
      Joe Cool 6 years ago

      There is nothing for free, because you are paying a 5% surcharge – that retailers are forced to levy – by using Visa or Mastercharge. Retailers who offered a corresponding 5% discount for cash were threatened with facility withdrawal. The banks are loving this cash crisis, and no doubt the Governor will receive ‘tokens of gratitude’ for trying to force people to place their money in banks. Mangudya is actually trying to undermine the concepts of ‘currency’ and ‘legal tender’. He is nothing more than a Zanu PF whore, who has sold himself for 30 pieces of paper (bond notes).

  • comment-avatar
    ntaba 6 years ago

    Zimbabwe now has a new banking system. It is known as the MBS. MBS stands for the Mattress Banking System. Mattress Baking Systems come into their own when the government (read Zanu) of the day uses their Reserve bank to extort money from the people for the use of their political party. The commercial bankers surrender their integrity as custodians of customer investments (savings) to the thievery and corruption of the political system. The Zimbabwe Bird stamp is used to sanctify the thievery. Flashily dressed bankers in pinstripe suits parrot the words of the RBZ Guv and the Min of Finance – all big words, cliches and big concepts in an attempt to trick the people into thinking that the The Holy Trinity (Zanu, RBZ and the Banks) are absolute pillars of society and the world – and really know how to run the finances of the country. The entire system is aligned to enrich Zanu. The people have seen just that and have now voted with their mattresses. The MBS is a multi system banking system – you can easily upgrade to an International Sealy Postupaedic Multi Currency Account and place your mattresses in other countries. It is not so much – “Put your Money where your mouth is” – but rather “Put your money where your mattresses are.” The mattress banking system may well give Zanu something to think on or sleep on? Raiding businesses by checking their mattresses is a sign of panic within the RBZ and Govt who are anti MBS.

  • comment-avatar
    Pele Ali 6 years ago

    Zimbabwe is finished. When Robert Mugabe dies, a civil war will break out. There are already foreign forces and money waiting to start the war. Get your money out of Zimbabwe as soon as you can.

  • comment-avatar
    Private 6 years ago

    The concern with putting money into a bank in Zimbabwe seems to be the issue of trust.

    Can you trust – 100%, that you will be able to withdraw your same money at the end of the week when you need to pay your staff etc.

    This depends on total integrity in the system. When the money is deposited it cannot then be taken by govt and used for expensive trips abroad – because then it will be IMPOSSIBLE for everyone to withdraw their money, as the money will no longer be in the bank.

    In the US, you can withdraw nearly any amount at any time. They have armored trucks for this. In addition, if you transfer money in the US or EU, it moves quickly. A wire transfer in the US is generally available same or next day and can be withdrawn fully in cash – the money is really there.

    The US Fedwire system processes about 400 billion USD per working HOUR. This means trillions of dollars PER DAY. It is used to clear and settle transactions around the world, including oil, banking, payroll, insurance, property purchase etc. This is all based on TOTAL trust that when you put money in one end it will be available at the other.

    Delays in RTGS system allows the party managing the system to spend the “float”. This is a no-no because when folks notice the delays and the volumes decrease, they will not have the money to pay those needing to receive the funds as it will have already been spent / stolen.

    The farmers were told to get their payments electronically, that it would be better for them. I wonder if they would all agree that these rules “for their benefit” are really for their benefit?

    Or is for the benefit of the elites in Zanu PF stealing the money so that even though purchaser has paid IN the cash, it cannot be withdrawn?

    Farmers used to be paid in cash on the spot for many years, those buying would be happy to continue doing so (and of course, actually having money, do not find it hard to actually get US dollars)

    Why even quote these ministers? The problem is not with the small trader, but with the ministers who destroy the banking system. We are told to trust the zimbabwe dollar, but those in charge destroyed it. We are told to trust a cashless system run the same people – how can we know they won’t delay settlements, limit cash withdrawals etc so they can spend the money people have deposited?

    There is not an overburden on the US dollar. To be clear, in CASH bills alone there are $1,300 BILLION in US currency in circulation. If zimbabwe needs more, the US will be happy to provide it, money held in currency does not earn interest so is the cheapest form of financing available to the US. Whatever amount zimbabwe wants and can pay for the US will happily provide the same amount in bills.

    There is one risk – if zimbabawe takes depositors money or forex earnings and SPENDS the money on deficit spending, corruption, overly large wage bills. Then the money is stolen, and even if someone puts in $1,000 to the bank on Monday, they won’t be able to get it out on Friday – it will be gone.

    This last risk is what has people worried. And it isn’t ministers swooping in on small traders so they can steal their money that will solve this problem, but the police swooping in on the ministers!

    • comment-avatar
      Joe Cool 6 years ago

      It’s entirely simple – they want us to operate on a ‘cashless’ system, because there is no cash. It works like musical chairs – everything is fine until the music stops – then someone can’t find a chair, because it’s been taken away. This is exactly the plan with the ‘cashless society’ and the bond notes. We will operate on imaginary money while the main actors siphon off all the real currency in real US banknotes.

      The start will be with the civil servants’ pay, when they will be given bond notes when they go to the bank to draw their salary. It is they who need to stand up first and say NO, and they should assure the nation now that they will do so.

  • comment-avatar

    A law that forces people put money into the bank at the end of every day, and a crack team to enforce that law at pain of losing your trading licence !!!!!!!!!!!
    that sounds so like zanu pf – forcing the population to do this and forcing the population to do that – never ever to consider the idea of working with the population – they are an illegitimate government and the citizens must refuse to cooperate – Rambai…
    the reason people are keeping cash is that we all fear that any us$ in our accounts will one day soon miraculously become bond notes, and the real hard cash will cross the border in suitcases and containers to end up in offshore bank accounts in singapore and elsewhere. the reserve bank governor and minister of finance have already cited externalisation of funds as the major cause of the cash shortage. but since these activities are carried by our ‘leaders’, he has to turn a blind eye and extort US$ cash from legitimate business.
    to correct the economy and reduce externalisation of funds, it is normal to institute ‘confidence building measures’. not to activate a crack unit designed to swoop on anyone holding hard earned cash. but confidence building requires transparency, and with so many thieves holding the reins of power in zimbabwe, this will never happen.
    where is the $15 billion diamond money ?

  • comment-avatar
    DANGWA 6 years ago

    POINT OF SALE MUST BE MADE MANDATORY IN ALL RETAIL OUTLETS AND WHOLE SELLERS.

  • comment-avatar

    It is illegal, within the terms and conditions of Visa Card and MasterCard issuance, for the merchant to charge ANY amount of levy. If the price is say $55, then that is what should appear on the total column when you sign off on the transaction. People should boycott ANY/ALL merchants who charge a levy on card use.