Negotiating and Converting Money in Zimbabwe’s Multicurrency Environment

 By IMTFI Fellows Mahiya I.T and Gukurume S.

Hyperinflation

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

Off the Charts: Session Two of the 2016 Conference

In the panel on "Ecologies in Crisis: Transferring, Converting and Marketing Value in Unstable Times" with discussant Rosa Akbari of the International Rescue Committee stories of crisis and resilience turned out to encompass a wide variety of political and natural disasters.  As Akbari noted, when it comes to understanding creative responses to precarity in developing economies from the position of the developed world, "we have a lot more to learn from them."  The first presentation on "Managing, negotiating, and converting 'currency' in daily life in a multicurrency environment of Zimbabwe" by Innocent Tonderai Mahiya of Women's University in Africa and Simbarashe Gukurume of the University of Cape Town grappled with the effects of a "serious economic crisis," where "the worst inflation in the world for a country not at war" had created a country of "poor billionaires," where daily 50 thousand withdrawal limits cripples those earning salaries of 50 billion units in local currency.

The research team provided an overview of money providers.  EcoCash, the most widely used mobile money service in the country, launched in 2011.  It was subsequently joined by NetOne, which introduced the government-controlled OneWallet in 2013.  With Telecash, which is now the second-largest provider in the country, there are three giant telecommunication companies joined by other stakeholders and players in a growth environment in which the largest companies have over six million subscribers.  Thus this national mobile money environment could be compared in scale to the territories of the M-PESA model, which the research team attributed to the rapid introduction of mobile money services, which rapidly expanded in urban and rural areas.  Additionally mobile networks are seen as reliable by informants with an increased number of players in mobile money sectors.  Access is added by ubiquitous advertising including omnibuses and commercials on government radio and television.

The team's field site in Chivi was one of first areas to adopt foreign currency because of immigration flows creating a sending population to the community.  With so many from Chivi migrating to South Africa, there were formal and informal channels for currency alternatives long before the government adopted the multi-currency system, particularly with the circulation of the rand.  The team's  methodology was primarily qualitative, based on ethnographic participant observation with  interviews with clients and agents of mobile money services and informal conversations with villagers.  In addition to the rand, the US dollar was a common currency, but there was also the presence of the Chinese yuan.  Researchers were interested in the process which is negotiated during the exchange and features that include high social solidarity and the deployment of social capital.  Sometimes this involved the subverting of regulatory restrictions, as when elderly clients would sometimes send grandchildren to negotiate on their behalf or attempt transactions without documents by deploying social understanding mechanisms.  They also considered types of mobile money agents and the politics of space, because some operate in makeshift booths, while others are run out of shops.

"Financial Security: Laborers’ Transfer of Value from Karachi’s Marketplaces to Tribal War Zones in Pakistan" by Noman Baig of Habib University Pakhtun offered the perspectives of many participants living in contested territories under threat of drone strikes.  The three major perspectives were those of impoverished laborers, state officials, and actors with a corporate point of view  This research explored "the value transfer system of ethnic Pakhtun migrants working on daily wages in Karachi’s marketplaces." Baig chose to tackle the following research questions: "How do laborers transfer value from the city of Karachi to villages and tribal areas of Pakistan?" "How does state counter-terrorist surveillance impact laborers’ traditional value transfer system?" and "How are emerging financial technologies such as branchless banking shaping customary ways of handling money in Karachi’s marketplace?" Baig aspired to the ideals of the "good anthropologist" by attending to "their interactions with financial instruments such as branchless banking" and borrowing and credit practices "within their kinship, religious, and ethnic networks." His methodology emphasized a "deep hanging out with the laboring class" that was enhanced with semi-structured interviews.  He drew on many sources of information for his study to understand the experiences of his core group of laborers and migrants, including retail agents, Easypaisa staff, State Bank of Pakistan representatives, employees of the Habib Metropolitan Bank, currency dealers, and money lenders.

In negotiating alternatives, the Pakistan Post offered money orders, which were extremely slow but carried low fees.  Commercial banks charge significant transfer fee and might take days.  There were a number of appealing reasons to rely on truck and bus drivers who simply carry cash to far flung villages. Finally a local shopkeeper/moneylender could serve as an intermediary: if a laborer chooses to deliver cash in Karachi, the equivalent amount of food ration can be delivered to the laborer’s house in a village.   In other words, in this scenario,  it  was not physical currency but value that gets transferred. Choices were often dictated by generational differences and issues of trust and kinship
.
Easypaisa is emerging financial instrument with 250,000 retail agencies and 22 franchises in Karachi. It only takes two days to get a franchise, although it used to take 15 days.  The major requirement is to have to have a physical roof, so agents are not just sitting on a sidewalk.

Such mobile financial services facilitate dramatic changes around existing community bonds, which could also create disruptions in an already disrupted environment. The use of digital financial instruments might seem to offer relative autonomy, Baig argued, but that autonomy could also risk greater precocity.  A person becomes "more vulnerable to economic crisis" but is "also released from embedded networks of kinship."  These changes also encompass changing gender dynamics and disrupt existing systems of home delivery through kinship.

This disintermediation might be appealing when "laborers hesitate to visit banks" that are too "fancy and glittery."  In place of banks, retail agents offer banking services to the underprivileged, but laborers’ income gets incorporated into financial logics far beyond Karachi. "So they become included but they stay excluded." In other words, "financial inclusion and physical exclusion happens simultaneously," because "financial categorization reproduces social hierarchies" in the "network paradox of capitalism" that "allows you in but excludes you also."  Baig insists that such people aren't really "unbanked" but they are banked "in their own ways."

He cautioned that regulation of Hawala by the state plays a significant role as existing networks are "demonized" and the "alternate of corporate technologies" is lauded.  He explained that Western Union "became popular after 9/11," because the informal system was seen as illegal, but "profit comes to Wall Street."  In his view of the "financial ecology" he is interested in "how a laborer in bazaar in Karachi is connected" to the U.S. sector. He also expressed his concerns that "the discourse of financial inclusion gives a negative valuation to everyday forms of money management" particularly "under the rubric of security and counter-terrorism."

According to the presenter, "Strange Intersections: Humans, Technology and Disaster in a Himalayan Valley (Nepal)" by Kabir Mansingh Heimsath of Lewis & Clark College could just as easily be retitled "strange disjunctions."  The commodity Heimsath focused upon in his IMTFI research is an unusual one: the caterpillar fungus yarta.  He explained how his interest in "the experience of space and place" shaped a relatively "new project on South side of the Himalayas."  Although he hasn't "done focused fieldwork yet," the research questions began to emerge in late June 2013 from a conversation in back of vehicle going to Manang.  He described interacting with a "spotlessly dressed" man "just as monsoons were beginning." When he glanced down at the man's baggage, the man explained that he was going up to a remote region to sell caterpillar fungus, because he was told prices were higher in a remote valley than up in metropole.  Heimsath puzzled over the "weird commodity chain" of "taking something out and bringing it back again."

He described how Manang was culturally Tibetan but part of Nepal with a history of trade and smuggling.  Because of a large exodus to Katmandu, the region had "huge ostentatious houses based on money they made with international trade," as well as financial streams from trekking tourism and yartsa.  He characterized the area as "cosmopolitan for decades," because Yartsa was already comparable to the price of gold and"almost anyone can pick it." He described himself as working "in the footsteps of Anna Tsing whose 2009 article on mushroom foragers was formative for his work. He also credited the ideas of Tim Ingold on space and place as helpful for not conceptualizing them as an "empty passive category" containing place.  He noted his own "preference in thinking about pathways and movements," so that space was"always coming into being through pathways, movements.

This product of "summer grass" and "winter worms" grows in human influenced landscapes and yak pathways. Foragers never sell directly to the international market, because there are several levels of middlemen. "Exporters aren't even on map," because there are smugglers as well as buyers and exporters.  Yarta is used primarily as gift item among elites like Tsing's mushroom mappings.  In considering the overlap with tourist networks, he asked if it an intersection or lanes on the highway.  He aspires to do a "similar mapping for road the itself," because in Nepal half of all roads have been built in last decade in response to a "teleological development paradigm" in which "we build the road, and everything else will be fine."  As he exclaimed, "these networks existed before the road got there, and the money was there before the road, so why do we need the road?"  )He pointed out that hydropower was also as paradigmatic development project.)  His planned research would look at how the earthquake has effected all of this.

In the question and answer session, participants developed the theme of "following the money" and the dynamics of inclusion and exclusion in a group largely skeptical of the development paradigm.