Tough times ahead for Zimbabwe’s mobile money companies

ZIMBABWE’s strict regulations for mobile money platforms (MMPs) have put them in jeopardy, amid indications that some may be forced to restructure their business models or lay off staff to survive the turmoil.

The largest of the MMPs, EcoCash Holdings appears to be feeling the most impact after complaining of being “severely restricted due to regulated transaction limits, regulated pricing and the continued suspension” of some of its revenue-generating services. income in a press release accompanying its results. for the year ended February 28, 2022, published two weeks ago.

In the results, EcoCash said strict regulation had limited its growth, amid a deteriorating macro-economic environment, while the cut of some of its key services, including cash-in and cash-out services, was limiting income generation.

“The growth of our mobile money business has been severely limited due to regulated transaction limits, regulated pricing and the continued suspension of some of our revenue-generating services,” said President Sheree Shereni.

With a market share of over 90% of all MMPs, EcoCash’s challenges mirror those faced by the entire industry.

EcoCash challenges date back to May 2020, when the Reserve Bank of Zimbabwe (RBZ) suspended more than 50,000 EcoCash mobile money agents, ordered thousands of merchants to halt cash-in and cash-out services and to cap daily transactions, among a host of restrictions imposed in what the central bank said were measures to “stabilize the local currency.”

Although EcoCash denied the charges, it was forced to comply with the measures. But since then, hundreds of thousands of families who relied on commissions from the agent business for their livelihood have lost a vital source of income while EcoCash itself has seen its earnings affected.

At the same time, for millions of Zimbabweans who depend on mobile money operators, primarily EcoCash, for payment for basic goods and services, life has become increasingly difficult, given local cash shortages.

EcoCash argued that the measures have also contributed to Zimdollar’s continued loss of value, citing that since the time they were imposed, the local currency has fallen against the US dollar from $57.35 to $1. US in June 2020 over $405: US$1 in July 2022 officially.

Reports suggest the local currency is trading over $800 for the greenback on the streets.

EcoCash Holdings’ annual financial results were fairly modest, with revenue up 26% to $30 billion from $23.7 billion a year earlier.

But the company warned it was facing challenges due to “macroeconomic uncertainties characterized by hyperinflation, rapid policy changes and difficult access to foreign currency as well as global and local uncertainties created by the impact of the renewal of COVID-19”.

To put the business challenges of mobile money into context, a mobile money subscriber is currently limited to $680,000 per month of peer-to-peer transactions, while a bank customer can transfer up to $1.5 million dollars a day, or $45 million a month. months, industry officials said.

Transaction limit regulations, which are well below the rate of inflation, therefore limit the use of mobile money and inhibit the growth of the country’s mobile money business.

Analysts recently warned that tight regulation of the mobile money industry is putting serious pressure on the company’s bottom line and severely limiting options for its management. They predicted that barring a sudden turnaround in the country’s tough economic environment, it was highly likely that the company would consider either restructuring its operations or cutting some jobs.

Last week, several experts told our sister weekly publication The standard that it was only a matter of time before companies began to restructure in order to stay afloat amid the country’s deteriorating economic conditions.

For EcoCash in particular, the twin challenges of heavy industry regulation and weak demand due to deteriorating economic conditions will test management. Since banning its agent business, a channel that would have been supported in the back office by hundreds of employees, EcoCash has maintained its pre-2020 workforce.

Although EcoCash Holdings said in its financial results that it was optimistic about the future, it warned that it would “adopt mitigation measures, within the limits of the laws of the country, to minimize the impacts negative effects of the difficult operating environment” on its business. . – Masvingo mirror

Casey J. Nelson