Mobile money services have made a major impact on the African continent over the years. Following a new decree by the Zimbabwean government, these services are no longer allowed to operate in the country. This decision is a direct result of growing concerns over the national currency’s stability. Below is a history of events illustrating the current issues.
The Zimbabwean Dollar Problem
Most African countries suffer from the same financial problems. Local economies are not healthy, and some can even turn very problematic as time progresses. Zimbabwe is a country where financial problems have always been part of everyday life, it seems.
Its best-known national currency, the Zimbabwean Dollar, has a colorful history. It has been subjected to jokes and memes on the internet for some time now. While most people would love to own 100 trillion dollars in currency, that doesn’t apply to Zimbabwe’s domestic currency.
Today, one Zimbabwean dollar would be worth $0.00276. That means it takes nearly 362 ZWB to obtain one US Dollar. It may not seem like the worst exchange rate, but don’t be fooled by these figures. This is a currency that has been suspended indefinitely from being used through most international money exchange services.
It is also worth mentioning that physical ZWD bills are hard to come by. Obtaining Zimbabwean Dollars at a bank is virtually impossible, simply because they do not have this currency available. For all intents and purposes, it has become a collector’s currency. The Zimbabwean Dollar was removed from official circulation in the country several years ago.
Using Zimbabwean Bond Notes
As if the ZWD fiasco wasn’t bothersome enough, the next national currency in Zimbabwe became bond notes and bond coins. These are banknotes and coins as they are used in the rest of the world. However, the notes aren’t a currency in itself, but rather a form of legal tender pegged equally against the US dollar.
Two different bond notes have ever existed, The 2-dollars bond note is green, whereas the 5-dollars bond note is purple.
In February of 2019, these bond notes were scrapped as well. They are part of the reserve basket of ‘values” that makes up the RTGS dollar.
The RTGS Dollar of Zimdollar
Despite a lot of initial promise the Zimdollar may be the shortest-lived currency in Zimbabwe to date. It was used from June to November 2019 in Zimbabwe, before being replaced by something else once again.
Rampant inflation forced the Zimbabwean government to look for alternative solutions. This is a very common theme in the financial history of the African nation, unfortunately
Banning Mobile Money and Stock Trading
Following the Zimdollar debacle, most of Zimbabwe seemed to revert back to obtaining US Dollars. Foreign legal tenders were successfully brought into circulation again, which seemed the best course of action at the time. By tapping into US Dollar liquidity, it didn’t long for mobile money companies to take advantage of this situation.
In Africa, mobile phones are far more common than bank accounts. It is a better way to send and receive money with ease. Companies such as EcoCash quickly made a name for themselves, although not always for a good reason.
According to the Zimbabwean government, this company – as well as others – are responsible for the rising black market exchange rate between the Zimdollar and the US Dollar.
As one would expect, the black market is the go-to place for residents looking to obtain the US Dollar. Local banks are not keen on using their reserves for this specific purpose. This situation is very similar to what is happening in Lebanon as of late.
To date, the market penetration of mobile money in Zimbabwe sits near 85%. This is based on statistics provided by the country’s central bank in early 2020.
Banning access to mobile money is not a smart idea. In fact, it will only make life more difficult for both residents and businesses alike.
In fact, this will only trigger negative repercussions for the Zimbabwe Stock Exchange as well. It was already impossible to buy shares of “dual listed” companies. Moving forward, the Harara stock market will not process any trades at all for the foreseeable future.
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