After succeeding in reducing the black market last week the government has struck again. Instead of a limited freeze of a few accounts fear struck this morning as reports started circulating that Ecocash was closing/locking/freezing Ecocash Agent lines on a wholesale scale.
Government puts the squeeze on Econet?
Due to the cash crisis, Ecocash has become Zimbabwe’s de facto currency, even though Econet Group’s founding director disputes this. The fact that Ecocash is a currency is reinforced by the fact that most businesses have different prices depending on the mode of payment cash, Ecocash or swipe.
When the government introduced the 2% tax Ecocash Agent lines became valuable as a way for black market dealers to buy and sell foreign currency. Not only do they not get to pay this tax and avoid Ecocash transaction charges which apply to normal transactions, they even get paid a commission by Ecocash. There is also the fact that Agent lines have better transaction limits than ordinary lines.
The government of Zimbabwe has always blamed Ecocash Agents and Ecocash by extension, for fueling the black market. Over the weekend the Zimbabwe Anti Corruption Commission announced that they would go after the foreign currency black market which the government blames for all our economic woes when they are not blaming sanctions.
It seems Ecocash is feeling the pressure and has responded by closing all agents lines suspected of taking part in illicit deals.
Things are bad. They are closing all lines that do cash ins but rarely if ever do cash outs. Lots of guys have stopped trading as they fear their lines will be closed.
What one dealer had to say
Indeed cash-ins without a lot of cashouts are a hallmark of the black market business. It means usually that the person holding the agent line is probably dealing in foreign currency trades although it might just mean the person is paying people for work done etc. By closing such lines Econet is putting the burden of proof upon the agent.
Rates tumble
As few dealers are buying it means there is excess supply on the market. While rates opened at $18.00 they have since fallen to a dismal $15 / 1 USD. It is doubtful they remain this low despite what the government does give the level of money supply and the fact that foreign currency still remains in short supply.
[Update]
The rate seems to have started recovering with some paying as high as $17 ZWL.
The government is chocking businesses
These artificial lows are not going to help businesses which still cannot access foreign currency from the official market which is dominated by bigger businesses and the political elite.
Eventually, if businesses are unable to buy and sell on the black market they will die as the government continues its stranglehold. The end result is much worse than high prices in shops. Just like in 2008 we are staring at the very real possibility that lots of shops will be empty soon as they will be unable to restock.
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