Barely a month after the Reserve Bank of Zimbabwe (RBZ) introduced the foreign auctioning system and suspended mobile money transfer agent and merchant lines, illegal foreign currency dealers who were thriving on manipulating the foreign exchange rate are already feeling the heat.
While it is still early days, it appears like the RBZ’s decision to switch from the interbank market to an auction system have driven most forex dealers out of business since companies are now accessing their foreign currency requirements on the formal market.
In addition, the dealers’ mobile money balances are still locked in their respective agent and merchant accounts and therefore very few are trading from their mobile lines with a daily maximum limit of $5 000.
This week, the Zimbabwe dollar eased to $68.88 from last week’s $65.80, with analysts saying the auction system will result in stabilisation of prices.
This has seen parallel market rates tumbling from a high of $120:US$1, with the United States dollar trading for between $80 and $90 since last week.
While defiant forex dealers can still use bank transfers, it appears like most of their ‘clients’ prefer instant mobile money.
In addition, many people in the informal sector are unbanked. However to remedy this, the RBZ is coordinating the implementation of a five-year National Financial Inclusion Strategy which was launched in 2016.
President Mnangagwa has already commended the return of price stability due to the introduction of the auction system.
“As Government, we envisage a situation where foreign currency resources and raw materials are improved for the productive sector as this will result in increased availability and affordability of goods as well as the creation of jobs,” said the President.
Last week, RBZ governor, Dr John Mangudya said the forex auction system will push illegal forex traders out of business and stabilise the exchange rate to pave way for economic growth.
“We are using the Dutch Auction System and under the system, each successful bidder is charged the rate he or she bid and it is always the case that the highest bidder today will lower the bid and the lowest bid will increase the bid to reach an equilibrium convergence.
“The auction is designed to enhance transparency in the management of foreign exchange and achieve a realistic market driven exchange rate for the local currency,” said Dr Mangudya.
But defiant forex dealers have vowed to continue fighting for their ‘territory’. Desperate ones whose agent and merchant lines were closed are now using social media to lure customers.
In their new way of doing business, the dealers offer to pay for fuel, LPG gas and groceries in exchange for foreign currency.
One of the social media messages sent by The Manica Post reads: “The roof is on fire – CBZ 90, CABS 85, Swipe 90, OneMoney 85, Ecocash 85. Muchenjeri wese anofona. Toiita zviripo, kuchekesa pamuchina – swiping. Zvikawanda zvinhu zvacho toonesa. (The wise one calls. We adapt to any situation, even swiping on POS machines. More money attracts higher rates).”
However, a survey conducted by The Manica Post this week revealed that business is no longer lucrative for the dealers as very small amounts are exchanging hands at the black market.
Those interviewed by this publication declined to be named for fear of being arrested.
However, they revealed that they are trying to devise ways of remaining relevant with little success.
“We have been trying to stay afloat in the business but it is proving to be tough. At times we are operating from supermarkets and furniture shops where we swipe for clients who want to buy groceries and furniture. Unfortunately there isn’t much business in that area,” said a dealer who operates from the Moto-Moto area in Mutare’s Central Busines District.
Another dealer who operates at Cul-de-sac next to The Manica Post building said he has since devised a back-up plan for his survival.
“I have moved to selling second hand clothes. However, that path has not been easy as well as it is still an illegal business,” he said.
— Manica Post