Mnangagwa picks fight with tycoon
Zimbabwe's president has picked a fight with the country's
most successful businessman. The economy may be the loser.
Under pressure from a plunging currency and 737% inflation,
President Emmerson Mnangagwa's administration on June 27 restricted almost all
mobile-money transactions in a country where 90% of commerce is conducted on
handsets because of cash shortages. On July 17, the police accused Econet
Wireless Zimbabwe, which dominates mobile-cash transfers, of money laundering.
The battle pits Mnangagwa, who came to power in a November
2017 coup, against Strive Masiyiwa, the businessman who founded and controls
Econet. The company's mobile-money unit Ecocash has 11.4 million customers and
a 98% share of the market. Its platform is used for everything from buying
household furniture to paying public-transport fares.
The government is seeking a "scapegoat," said
Derek Matyszak, an independent governance analyst in Harare, the capital.
"They are shooting from the hip at the inflation monster."
Masiyiwa, who founded Econet in 1998, has a net worth valued
at more than $1 billion, based on Bloomberg calculations.
The 59-year-old businessman and philanthropist has been a
frequent critic of the government. At the same time, he's appealed for aid to
help Zimbabwe fight the coronavirus pandemic.
Blind eye
Ecocash is accused by the government of turning a blind eye
to the use of its platform to fuel black-market currency trading. The Zimbabwe
dollar was valued at 100 per US dollar on the black market - four times above a
currency peg of 25 to the greenback that ended in June - at about the time of
the transaction ban. The gap has since narrowed as the authorities allowed the
official rate to depreciate to 72 to the dollar.
Oversight of Ecocash will now be moved to the central bank
from the Postal and Telecommunications Regulatory Authority of Zimbabwe. From
Aug. 15, the central bank will be able to monitor its transactions, as they
will pass through ZimSwitch, a national payment platform.
"It's the necessary medicine to cure our economy, which
is under siege," said Patrick Chinamasa, acting spokesman for the ruling
Zimbabwe African National Union-Patriotic Front.
A search and seizure warrant filed by the police aims to
allow them to examine Ecocash's subscriber list and transactions.
Dire consequences
"Independent investigations so far have also confirmed
government allegations," said Nick Mangwana, the government spokesman.
"Implementation of a full set of regulatory reforms will even bring down
the rate and prices to a much more realistic level which responds to economic
fundamentals and not whimsical creation of digital money by some
platforms."
Econet denies the money-laundering allegations. The
accusations against are a pretext for a bolder move, Econet Chief Executive
Officer Douglas Mboweni said in court filings.
"There appears to be an agenda to destroy Econet and
remove it from its market leadership position to the benefit of another
operator," he said. It counts as rivals state-owned NetOne and Telecel
Zimbabwe.
A complete shutdown of Ecocash could have dire consequences
for the economy. About 7 million transactions from 2 million users were handled
daily on its platform before the shutdown.
"Ecocash is a much bigger problem for authorities as
it's also used by ordinary people for the payment of bills and in
supermarkets," said Tony Hawkins, an economics professor at the University
of Zimbabwe. It also provides the government with revenue, as there is a 2% tax
on transactions.
The measures "didn't take into consideration the impact
on the transacting public," said Kuda Musasiwa, the founder of Fresh In A
Box, a Harare-based company that sells groceries online and has seen a 90%
slump in mobile payments.
'End is coming'
The animosity between Econet and the authorities dates back
to 1998, when the company was founded. Masiyiwa waged a five-year legal battle
with former ruler Robert Mugabe's government before he could get its licence.
Mnangagwa, 77, was then one of Mugabe's closest allies.
Since then, Econet has been accused of funding subversive
activities, failing to remit taxes in foreign currency and refusing to comply
with an order to share its infrastructure with state owned rivals. It's been
repeatedly threatened with a withdrawal of its licence.
Ecocash is one of the companies described by Mnangagwa as
"wolves in sheep's clothing" when he warned June 24 that the
"end is coming" for private companies he accused of weakening the
currency.
George Charamba, Mnangagwa's spokesperson, didn't respond to
several calls seeking comment.
Masiyiwa, who is in self-imposed exile and claimed an
abduction attempt in 2004, has been living mostly between Johannesburg and
London. He has played a key role in providing assistance to the nation, helping
with aid after a cyclone struck last year and paying school fees for more than
250 000 children.
"It's a love-hate relationship that exists between the
government and Econet," said Matyszak. "The ruling party hates it
because it believes one of its structures is fueling the black market. On the
other hand, they won't hesitate to knock on Masiyiwa's door when they need
money."
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