Monday, November 14, 2016

Negotiating and Converting Money in Zimbabwe’s Multicurrency Environment

 By IMTFI Fellows Mahiya I.T and Gukurume S.

In 2009, under the banner of 'dollarization', Zimbabwe adopted a multicurrency system after experiencing protracted socio-economic and political quagmires and a world record hyperinflation exceeding a crescendo of 250 million percent in 2008. Under this multicurrency system, Zimbabwe adopted a basket of foreign currencies as official currencies. These included the United States Dollar, the South African Rand, the Botswana Pula, the British Pound and the Euro (and later on the Chinese Yuan) – all of which operated simultaneously in the economy. The beginnings of this multicurrency system coincided closely with the adoption and growth of mobile money services. This blog highlights findings from the 12-month long ethnographic research project that examined the socio-economic dynamics of balancing and negotiating the uses of multiple currencies in the wake of mobile money adoption. To gain a nuanced comprehension of the complex rituals involved in these currency conversions, data collection was done using qualitative ethnographic techniques such as participant observation and in-depth interviews with mobile money users and non-users, and key informants. Large and diversified sample from two communities – rural Chivi and urban Harare – allowed us to compare and holistically capture the complexities of mobile money politics as well as the temporalities of foreign currency conversions.

Multi-currency transactions prior to "dollarization" and the advent of mobile money services

In Chivi, a semi-arid rural community located in the southern part of Zimbabwe, most young men and women of working age migrate to close-by South Africa as legal and illegal migrant laborer or cross-border traders. Considerable remittance inflows from these migrants (locally called majonijoni) has led to a high circulation and usage of the South African rand in Chivi that predates the official adoption of the multicurrency system. 

Harare, on the other hand, being the capital, is the hub of economic transactions and where multiple currencies had been circulating illegally much prior to official dollarization. During the hyperinflationary era, the Roadport section of Harare was even referred to as the Zimbabwean “World Bank” due to the high prevalence of illicit transactions in foreign currencies that found their way in through informal remittance channels of the burgeoning Zimbabwean Diaspora. The crippling cash and liquidity crisis in the country, led mobile money transactions to arguably become the lifeblood of business transactions in Harare and Chivi. And several telecommunication companies providing mobile money services such as TextACash and NettCash (now rebranded as GetCash) have infiltrated the market and Econet’s EcoCash is the most widely used service in Zimbabwe. In Harare, where the government was actively encouraging cashless transactions, we found that many participants did not trust services provided by government controlled mobile operators such as Telecash and NetOne. As one of our respondents sarcastically asserted:
“…the government is about to close down due to bankruptcy, why would I buy a line owned by such a government… it will be a waste of money.”

Billboard for NettCash Mobile Money Service 

Social Capital, IDs and Trust in Mobile Money Transactions

Social capital and trust were important factors in transactions involving currency conversions especially for the rural people of Chivi who were using the US dollar for the first time and required social networks to i) confirm the currency was not counterfeit, ii) to circumvent regulations requiring identity verification based on national ID numbers, iii) and for the mobile phone to be physically present at the point of transaction. Due to convivial relations and social solidarity, mobile money agents often transacted without IDs and some clients even shared their secret pin number with the agents. Tino, a mobile money agent in Chivi explained:

…that young boy is my client’s grandson whom she sends to cash out some money here. I don’t ask for the identification document because I know them by name and even the ID number and above all I trust them. I have a number of such clients who always perform their transactions with me without their IDs.

In Harare, however, it was almost impossible to cash-out money or transact without ID and agents tended to be very strict. This may be because cases of fraud, fake money and theft were not uncommon in the big city. However, we noted that even though social solidarity and social capital were more pronounced in Chivi, villagers sometimes complained of being tricked and cheated due to their mobile money and foreign currency illiteracy.

Accepting and Rejecting Currencies

We observed that, while in Chivi the South African rand was widely accepted for everyday transactions, in Harare almost all retail shops and transport operators were reluctant to accept the rand. During our fieldwork, the value of the rand was unstable and volatile against the widely used US dollar, making it very precarious for businesses in Harare to transact in the rand. One of our participants in Harare, Evans, whose parents worked in South Africa, said:

My parents send me my school fees in rands through ‘EcoCash Diaspora’ but I have to convert it into dollars because no one is accepting rands these days even if you want to pay a taxi, buy tomatoes, groceries let alone paying school fees. I don’t know it just started recently there is nothing I can do.

EcoCash Client in Chivi
In sharp contrast, most businesses in Chivi including mobile money agents accepted the rand. This could be attributed to the large volume of cross border trade with South Africa. Most business operators in Chivi bought their products in South Africa and a large number of traders from Chivi commuted to South Africa on a weekly basis to buy goods for resale back in the community. In fact, Chivi closely mirrored its South African diaspora - most goods and clothes sold in the area were bought in Musina, a small border town in South Africa. One of our participants Mr Jonasi, a prominent businessman at Chivi’s growth point business centre who owns a grocery shop and a clothing shop, is also an EcoCash mobile money agent. We asked him which currency he prefers:

Of course the US dollar is more valuable compared to the rand but here we are not rigid. In all my businesses I accept both the rand and US dollar. You will go out of business if you reject the rand like they do in Harare. People here get most of their money in rands so say if you receive rands from South Africa and you want dollars to pay fees then I will convert it for you on the exchange rate of that day. I convert rands to dollars here everyday and the good thing is I buy my products in Musina in rands so I don’t make any loss by transacting in rands. 

Exchange Rate Fluidity, Conflicts and Calculative Risks

Exchange Rates in Chivi
Interestingly, we also observed informality and fluidity in the exchange rates especially in Chivi where people relied on information obtained from Zimbabwe-South Africa border. The exchange rate was not static but changed over time, varied from place to place and was often negotiated, which at times led to conflict and serious quarrels. We observed long and protracted discussions lasting ten to twenty minutes before currency conversions were decided upon and completed. For instance, Keresina, a female mobile money agent at Chivi turn-off along the Masvingo-Beit bridge highway got most of her clients from commuters and villagers. She said:

I had a nasty experience with one woman in the village, she thought I had cheated her because her husband had send her some US dollars through EcoCash but she wanted to buy grocery in Musina South Africa so I converted her dollars into rands. When she got to the border she was told a different exchange rate but you know these rates differ from place to place. So when she came back she confronted me and demanded more money - we ended up at the police station. From that day I just accept dollars only and I don’t convert unless it’s a person I know and we have agreed.

In Harare, the few people who accepted the rand and the Botswana Pula had to take calculative risks. First thing every morning, they gathered information on the current value of the rand from their social networks, which determined whether they would accept the rand on that particular day. We also observed that the prevailing cash shortages in the country almost paralyzed cash-out mobile money transactions as agents struggled to provide clients with cash. Driven by the crippling cash crisis, mobile money operators and foreign currency dealers also traded the dollar against itself. One dollar in cash from black market dealers and mobile money agents could be charged a premium and cost $1.07. Moreover, getting cash from a mobile operator was now being regarded as a favor and ‘appreciative’ clients would give small amounts of money (one or two dollars) to the agent for giving them cash. It became the norm for agents to ‘reserve’ cash for these clients. Some clients would even leave their phones and access pin codes with agents so that once cash was available, the agent could cash out on their behalf. This was in part fueled by banks imposing a maximum withdrawal of $500 per week due to the biting liquidity crunch. Other financial practices such as MMM Global have emerged where participants invest and donat money, particularly through EcoCash, and earned 30% interest, that some have framed as Ponzi schemes.

The Zimbabwean monetary ecosystem continues to transform on a daily basis. The government intends to introduce a surrogate local currency called ‘Bond Notes’ allegedly equivalent to the US dollar. This will undoubtedly influence and add new dimensions to mobile money adoption and currency conversions and in effect provide fertile ground for future investigation and research.

Read more in Mahiya and Gukurume's Final Report

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