For most Zimbabweans hard pressed for cash which has become so scarce on the market, the sight of money changers on the streets is disheartening as they thrive on exorbitant cash premiums on mobile money users.
Premiums on cash have been inflated as high as 65 percent as hard cash remains inaccessible due to cash hoarding by these street cartels.
Efforts by authorities to curb the spiraling exchange rates have met resistance, as currently there are no laws to incriminate trading of cash on the mobile money platforms.
Through a constitutional provision of the Presidential Powers (Temporary Measures) Act which involved amending the Exchange Control and Money Laundering and Proceeds of Crime Acts, a new law was put in place in November 2018 to purge illicit money trading.
The law prescribed a maximum 10-year custodial sentence for illegal currency traders, but it only went as far as that.
There were a lot of shortcomings that led to ineffectiveness of this law, most prominently its failure to give guidance on the more sophisticated aspect of traders who won’t loiter in the streets selling money but cartels that trade massive sums of money on mobile money platforms.
“Existing laws are not good enough to control mobile money transfer system from sliding into informality- beyond the reach of the arm of the law,” financial legal expert Dr James Tsabora said.
“Current laws presuppose a highly formal economy and this is the opposite – the shakers and movers of existing financial sectors cannot ignore the informality brought about by difficult-to-regulate mobile money transfer system,” he adds.
He however noted the need to control the problem from the root cause that is pressing mobile money service providers to ensure their systems are water tight.
Ecocash, the country’s largest mobile money service provider, commanding about 94 percent market share in the business say it has made over 4 000 suspension of agent lines suspected to have been engaged in some form of illicit money transfers.
It however notes that apart from suspending agents from their network, there is no further punitive measure either the company or the law enforcement agencies can undertake, which makes a strong case for effective legislation to be crafted.
“As Ecocash, we have contracts that our agents sign before getting the agent lines that spell out how they should conduct business. Charging exorbitant rates in cash to consumers is illegal and we condone that. But we can only able to monitor and tell transactions that are stipulated even on our rate charts. However, we do not see other charges that are then negotiated outside the stipulated ones,” said a representative from the leading mobile network provider.
Recently, at the opening of the second session of the 9th Parliament, President Emmerson Mnangagwa challenged legislators to speed up enactment of all laws to align them with the 2013 Constitution.
“The law must be a universal instrument of development. As such, the slow pace in this August House, which has resulted in a low number of bills passing through Parliament, cannot be allowed to continue. I, thus, challenge honourable members in their individual and collective capacities, to play their part in speeding up our parliamentary processes.” said Mnangagwa.
However, financial experts weighed in and said if the situation remains as it is, the prevalence of illicit electronic money trading will continue to put pressure on the exchange rate, hence devaluing the local currency.