THE Government has suspended phone-based money transactions with immediate effect as investigations into allegations that they fuel black market transactions that have caused runaway inflation gather pace.
The suspension is expected to allow reforms to restore mobile money platforms to their original purpose. Measures to safeguard the interests of the innocent public that use the platforms have been put in place.
In a statement yesterday, Permanent Secretary for Information, Publicity and Broadcasting Services Mr Nick Mangwana said the move would converge all exchange rates to the single market-based one set by the weekly auctions run by the Reserve Bank of Zimbabwe (RBZ).
The black market was being funded and fuelled through the use of the four mobile money platforms, with EcoCash, where 94 percent of mobile transactions take place, being described as the “central pivot of the galloping black market exchange rate and therefore fuelling the incessant price hikes of goods and services that are bedevilling the economy and causing untold hardship to the people of Zimbabwe”.
The EcoCash system holds $8 billion in 501 000 merchant and agent’s accounts, along with large balances in suspense accounts.
The Financial Intelligence Unit of the RBZ cannot monitor these accounts the same way they can monitor dealings in the banking sector.
The Government, said Mr Mangwana, has gathered evidence that millions of dollars are being transferred by merchants every day using mobile platforms to street runners in the black market for foreign exchange.
The runners buy forex and surrender it to their funders.
The Government recently suspended some agency lines to rein in the practice but new unaudited lines have been opened and are being used by criminal syndicates.
Mobile money systems are under the communications regulator Postal and Telecommunications Regulatory Authority of Zimbabwe (Potraz), not the RBZ, therefore they cannot be monitored or audited.
Trading on the Zimbabwe Stock Exchange (ZSE) was generating fake exchange rates, in particular the Old Mutual Implied Rate that matches the prices paid for Old Mutual shares on the London, Johannesburg and Zimbabwean stock exchanges.
Mr Mangwana said the Government had intelligence that made a prime facie case that mobile money systems, with the deliberate or inadvertent help of the ZSE , were engaged in illicit activities that sabotage the economy.
Illegal externalisation of foreign currency through transfer mispricing, acting as banks although not licensed to do so, 501 000 EcoCash agent and merchant lines that could not be scrutinised by the Financial Intelligence Unit, fraudulently creating and issuing non-attributable and non-auditable agent cellphone lines and accounts are among the tactics used by the mobile phone platforms to destabilise the economy through artificially increasing exchange rates.
Mr Mangwana said the platforms were facilitating illicit trade in notes and coins that have resulted in premiums for cash of 30 percent to 50 percent and causing artificial shortages of cash in the banking system.
Mr Nick Mangwana
EcoCash has also allegedly allowed agent lines banned by the RBZ to continue trading and using bulk airtime sales at discounted prices tied to phantom US dollar exchange rates, distorting the Zimbabwean market and deliberately mopping up US dollars from the black market and forcing up exchange rates there.
Mr Mangwana said the mobile money platforms are: “Engaging in rampant and unchecked tax evasion, failing to report suspicious transactions or taking action against them, maintaining unauditable phone lines or accounts that are now being used by criminal syndicates, conniving with insiders to steal money through fraudulent activities like teeming and lading.
“Acting as conduits of fake US dollar notes. Facilitating criminal activity through non-enforcement of the know-your-customer requirements. While all four platforms — EcoCash, OneMoney, Telecash and MyCash — were complicit in these illicit activities in various degrees, EcoCash because of its 94 percent market share was the central pivot,” he said.
The impact of mobile money platforms funding black market activities was exacerbated by “fake counters” on the ZSE epitomised by the Old Mutual Implied Rate. This had led to multiple phantom exchange rates, which conspired to defeat fiscal policy.