HomeLocal NewsBusinesses cash-in on liquity crisis

Businesses cash-in on liquity crisis

AS the few formally employed Zimbabweans made their way home after another hard day at work around 6pm last Wednesday evening, a group of mostly elderly women, numbering about 200, could be seen preparing to sleep outside the People’s Own Savings Bank branch at the Main Post Office building in Harare.

By Taurai Mangudhla

It did not matter to them that the rainy season has begun or that they were abandoning the luxuries of their homes – desperation had driven them to sleep outside the bank.

All they had were cardboard boxes to spread on the concrete floor for comfort and a few blankets for warmth.

Soon, small divisions emerged among the group as they shared stories about their families and other topics.

Given that these desperate people were sleeping in a bank queue, by far the most topical issues were the cash shortages and harsh economic climate prevailing in the country.

At several banks in Harare’s Central Business District, among them the Cabs branch at the corner of Fourth Street and Central Avenue, the Cabs branch along Park Street and many others, desperate Zimbabweans, particularly pensioners, are sleeping outside banks to ensure they withdraw their little savings.

Taking advantage of the situation, some businesspeople have devised strategies to ensure they cash-in on the biting cash shortage.

Unfortunately, some of the strategies have negatively affected ordinary consumers who, in their desperation for cash, end up buying goods or services at a premium.

In most cases, customers who cannot find cash from their banks are at the mercy of large retailers who offer a cash-back facility on every transaction made.

Prior to the cash crisis, retailers would give their customers as much as US$500 after purchasing a single item from the shop using the Point of Sale (POS) machines.

This was to be later reduced by November 2015 to around US$250 per transaction as cash shortages began to manifest.

Retailers were to later reduce the maximum cash-back facility to an average of about US$100 by December 2015.

As the cash crisis worsened in 2016, the retailers then gave a cash equivalent three times the amount of the POS purchase. For example, one would get US$50 in cash after spending at least US$15 or US$100 after spending US$30.

At the time, cash was generally more available than now. Till operators in the large retail chains scored big on the cash shortages, preserving cash for their friends or only releasing cash to customers who give them an incentive.

As the cash crunch worsened, shops started giving on average double what the customer spends as cash-back. Now, retailers are on average giving customers an equivalent of their POS transaction as cash-back, forcing customers to buy more.

“I am travelling to Mutare for a funeral and I can’t use my ATM card to pay for a bus ticket or buy drinks along the way. There are some expenses at the funeral and they are paid for in cash so I have no option but to buy as much as I can in order to get more cash,” Ignatius Chiriya said as he was about to pay for his groceries at a local retailer.

“I have a three-year-old son and a daughter and we consume groceries worth about US$150 per month but I am now forced to just stock non-perishable items so that I get cash,” Chiriya added.

Fuel pump operators at service stations have also found a way to benefit, allowing some customers to use POS payments in exchange for cash. They, however, charge at least 10% for the cash.

Some fuel dealers have also instructed their staff to cap POS payments at US$20. To get more than US$20 of fuel using ‘plastic money’, motorists are being forced to oil the palms of the petrol attendants.

Banks, too, are cashing in.

Most institutions are charging at least US$2,50 per transaction for cash withdrawals regardless of the amount.
This means, one visits the bank as much as 20 times to withdraw US$1 000 and is charged as much as US$50 for the withdrawal. Previously one could make a US$1 000 withdrawal at once at a cost of US$2,50.

“This is daylight robbery, imagine how many times I go to the bank and I am only getting US$50 per day, look at my SMS alert. It’s like I am basically sharing my money with the bank,” a Steward Bank account holder, who requested not to be named, said.

Consumer Council of Zimbabwe (CCZ) director Rosemary Siyachitema said the behaviour of banks and retailers is tantamount to abuse of consumer rights.

“These are the issues we have put forward on different platforms and we are saying the central bank and the retailers have power to control these things and they should do so because consumers have to bear the brunt,” Siyachitema said.

“If you are in a shop, you will see a small conversation between the till operator and the customer before they are given cash back and we, as the CCZ, are saying this should stop. There should be standard procedure for cash-back. The banks and retailers agree on the measures introduced by government, but their practice is to the contrary and this should stop.”

Informal traders have also been hard hit by the cash crunch, as they are witnessing a decline in sales.

Lorenzo Moyo, a middle-aged vegetable vendor operating in the central business district in Harare, said his revenues are steadily declining as the cash crisis worsens.

“All our customers use cash basically and they have been unable to buy because there is no cash at the banks.

Sometimes I have been forced to discount or make smaller pockets for potatoes just to cater for the customers,” Moyo said. “As a businessman, you have to survive and part of the strategy has been accepting mobile money. However, this is proving to be tricky because our suppliers want cash and we can’t redeem hard cash anywhere because of this crisis.

“If you look at my truck right now it’s basically full because I haven’t sold much; this wouldn’t happen when people had cash.”

It is not only ordinary people and informal traders who have been negatively affected by the cash crunch. Big business is also feeling the pinch.

Confederation of Zimbabwe Industries CE Clifford Sileya says while the shortage has affected the entire business sector, those without POS machines have been affected the worst.

“Customers spend a very long time queuing for cash and, when they do get it, it’s very little so they don’t buy much,” Sileya said. “Apart from that, we have a culture of using cash in Zimbabwe and not all businesses have POS machines. This culture of using cash is part of the reason for this cash crisis, however.”

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