Cassava Smartech, the parent company of Ecocash – Zimbabwe’s biggest mobile money payment platform, have stated that in order for them to fully comply with the directive from the RBZ, they would effectively need to shut down the whole Ecocash system, as the ability for one to Cash-In and Cash-Out is core to their system.
It seems the mobile money giant, that has stated that it has moved over US$10 billion (plus ZW$7 billion) to date, is digging in deep, to effectively get the Central Bank to reverse their decision.
Zimbabweans have over 10.5 million Ecocash lines combined, 6.4 million of those being active within the last 3 months. Ecocash is threatening to shut down service, if it is to fully comply with the order that was issued by the RBZ on Monday 30 September 2019.
In the founding affidavit of Ecocash CEO, Edmore Chibi, he goes on to state that the parent company of Ecocash, Cassava Smartech, has shareholders that include pensioners, and such an order will adversely affect them. He also makes stabs at banks, and as to how the banking system has collapsed causing Zimbabweans to have lost confidence in the banking system.
Chibi’s full affidavit can be found below:
IN THE HIGH COURT OF ZIMBABWE CASE NO. /19 HELD AT HARARE
In the matter between:
CASSAVA SMARTECH ZIMBABWE LIMITED APPLICANT
RESERVE BANK OF ZIMBABWE RESPONDENT
FOUNDING AFFIDAVIT OF EDMORE CHIBI
I, Edmore Chibi, do hereby make oath and say that:
1. I am the Chief Executive Officer of the Applicant. The facts to which I swear are within my personal knowledge, correct and true.
2. The Applicant is Cassava SmarTech Zimbabwe Limited, a public company that is listed on the Zimbabwe Stock Exchange. The Applicant’s shareholders include. pension funds, meaning that most employees and retirees in Zimbabwe are beneficially interested in the equity of the Applicant. The Applicant operates a money transfer platform called Ecocash that is recognized by the Reserve Bank of Zimbabwe in accordance with the provisions of the National Payments Systems Act [Chapter 24:23].
3. The Respondent is the Reserve Bank of Zimbabwe, a statutory body duly constituted
in terms of the Reserve Bank of Zimbabwe Act [Chapter 22:15]. The Respondents is
the authority that is empowered to recognize and regulate payment systems in accordance with the provisions of the National Payments Systems Act [Chapter 24:23].
4. Ecocash is a pioneering mobile financial services solution that has given access to the Zimbabwean unbanked population in an unprecedented scale in Zimbabwe. Owing to the serial collapse of banking institutions in Zimbabwe, according to media reports, the size of the banked population had reduced to less than 10% of the population when Ecocash was introduced in September 2011. Presently, Ecocash has more than 10.5 million users, that is over 90% of the adult population of Zimbabwe. The growth in Ecocash has given access to financial services to the population that was hitherto unbanked and had lost confidence in the banking system.
5. The Ecocash platform has 10,562,070 users of which 6,400,000 have been active during the last 90 days. Of the total registered users, 6,337,242 are Rural customers while 4,224,828 are urban customers.
6. From September 2011 when the Cash In facility was introduced, 227,519,851 Cash In transactions worth US$10,195,546,216.00 plus ZW$7,542,785,610.00 have been conducted. On the other hand, 387,308,926 Cash Out transactions worth US$8,657,704,182.00 plus ZW$4,142,862,274.00 have also been conducted. Thus, Ecocash has played a critical role in facilitating transaction activity between Zimbabweans in circumstances of acute liquidity challenges.
7. The most important Ecocash products especially to the unbanked population that do not have ready access to banks are the cash in and cash out facilities. These facilities enable the population that may have cash to deposit their cash with Ecocash agents that number 51,000, more than the number of banking branches of all banks in Zimbabwe combined. In return, the wallet of the cash depositing customer is credited with the value of the cash deposited to enable the depositor to transact with the deposited cash electronically. There is no incident of money creation as the electronic money credited to the wallet will be equivalent to the amount of cash deposited. In the same manner, a customer can approach an Ecocash Agent for cash in exchange for money in their Ecocash Wallet using the Cash Out facility. This exchange of cash for electronic money has become the lifeblood of commercial activity in Zimbabwe and has been the lifeblood of commercial activity in Zimbabwe since September 2011.
8. Lately, there has been a surge in the demand for cash. People have been buying cash at a premium of approximately 35% using their RTGS Bank balances or Ecocash. The market information I have based on informed investigations by my team indicates that all electronic money balances are being heavily discounted in preference for cash. The exchange of electronic money for cash must actually be higher on the RTGS platform because the platform commands a higher market share by value than Ecocash. The results of our own investigations are corroborated by recent freezing of bank accounts that were announced by the Reserve Bank against some companies. I attach hereto marked “A”, an announcement by the Reserve Bank of Zimbabwe in terms of which it instructed banking institutions to freeze RTGS Dollar accounts.
9. The Reserve Bank of Zimbabwe and the Applicant have also been investigating incidences of abuse of the Ecocash Platform by users. Where users have been found to have abused the platform, their accounts have been frozen. Since June 2019, various accounts of agents and individuals have been frozen on allegations of money laundering or abuse of the Ecocash platform. For legal reasons I will not attach the various directives of the Respondent in this regard. I would need the authority of the Respondent and the affected individuals to publicize the communication. However, I offer to produce the various communication in Court should these facts be challenged by the Respondent.
10 I was shocked today when I received communication from the Respondent calling for a total shut down of the cash in and cash out facilities on the Ecocash Platform. I attach hereto marked “B” a copy of the directive. I contend on behalf of the Applicant that the directive is ultra vires the provisions of Section 10 of the National Payments Systems Act [Chapter 24:23] under which it purports to have been made, is irrational, and is a violation of the Applicant’s Constitutional Rights and the Constitutional Rights of the Users of Ecocash. I shall demonstrate my contention by reference to the requirements of a temporary interdict that I set out hereunder:
11 The Applicant and the users of Ecocash have clear rights, alternatively, Prima Facie Rights:
11.1 I have already indicated that Ecocash, with all its facilities that include Cash In and Cash Out is duly recognized by the Reserve Bank of Zimbabwe in accordance with the National Payments Systems Act [Chapter 24:23]. That recognition gives Applicant and its Ecocash clients a right to use these facilities.
11.2 The circumstances under which these facilities can be taken away are set out in Section 10 of the National Payment Systems Act [Chapter 24:23] which the Respondent purports to have acted under. I content that section 10 only authorizes the Respondent to act in the event that the system has itself done or omitted to do something, or that the Management Board of the system has itself done or omitted to do something. The Applicant is not punishable where some users of the system are alleged to have themselves committed abuse. The approach in that case is to penalize the defaulting users.
11.3 In the present case, annexure B is very clear. There is no wrong doing that is alleged to have been committed by the Ecocash System or its Management Board. The annexure alleges wrong doing on the part of some agents, not all of them or other innocent users of the system. Therefore the kind of wrong doing alleged by
the Respondent does not fall within the powers that Respondent has under Section 10 of the Act.
11.4 In any event, it would be irrational to take away the clear rights of the Applicant and the users of Ecocash simply because a few users are abusing the Ecocash platform. Such an irrational act is tantamount to punishing the innocent users of the platform. The case of the innocent Ecocash user is much stronger than that of the good wheat crop that was saved from the risk of being uprooted by mistake in Matthew 13:24- 43 where the master, in rejecting the request by his servants to pull up the weeds said, “No, if you puH up the weeds you might uproot the wheat along with them. Let them grow together until harvest; then at harvest time I wilt say to the harvesters, “First collect the weeds and tie them in bundles for burning; but gather the wheat into the barn”. I am advised by the Applicant’s legal practitioners, and I believe that the equivalent of this principle in our justice system is the Blackstone ratio which stipulates that it is better that ten guilty persons escape than that one innocent suffer. It is instructive that Government must err on the side of innocence, especially in the present case where the defaulting users can be investigated and identified, something that the Respondent has been doing already with the full cooperation of the Applicant.