Zi.Report Internet Writer
The place is an Internet Café in downtown Harare. Every machine, save for one or two that are out of order, is in furious use. There is a queue of about twenty people outside, anxiously waiting their turn.
Left: Milling around for the next deal outside Ximex Mall in Harare.
This is not an upsurge of Hararians wanting to use Yahoo or Google or to chat with their Diaspora-based family and friends online. This is a new wave of forex (foreign exchange) dealers that have found a way to beat the restrictive banking system.
Tapiwa steps out of the café with a smile on his face. He is in a hurry. For the last three years he has been dealing in forex. He says that much of the money that he uses to transact is not his. He’s an agent for certain “clients” of his. Companies and “big dharas” who need forex for their Zim dollars or vice versa. Business is good. He and his fellow dealers are always busy.
The Internet comes into all of this due to a strange mix of circumstances that are uniquely Zimbabwean.
First circumstance. Internet Banking. Over the last few years a number of Zimbabwean banks, notably NMB, FBC, CBZ and CABS have introduced Internet banking. It’s not like the Internet banking that has driven eCommerce in other countries. In Zimbabwe, eBanking is limited to delayed-real-time transfer of funds between accounts, payment of bills for certain utilities and checking of bank statements.
Secondly Circumstance. Three Different Exchange Rates. Zimbabwe has at least three exchange rates. The banks buy and sell foreign exchange at one rate. Forex dealers buy and sell it at a second rate if you are using cash and at a third rate if you want the Zim dollars transferred into your account via the Real Time Gross Settlement System (RTGS).
These rates are not fixed and change twice or three times a day. Yesterday, for instance, the lowest rate which is the Interbank rate was around US$1.00:ZW$20.00. The cash rate stood at US$1.00:ZW$100.00. The transfer rate was a whopping US$1.00:ZW$350.00.
You’d logically think that every one would go for the exchange method with the highest rate but it’s not that straight forward. Certain organisations such as international NGOs and listed companies need to be very accountable for their funds and so many will be forced to use the banks to get Zimbabwe dollars for their forex.
Most people who are selling forex would prefer cash in return, but that’s in short supply as bank account holders can only withdraw a maximum of ZW$300.00 per day from any one account. And that’s the third Circumstance. A crippling cash shortage that sees people queuing up for days to withdraw their salaries.
Forex dealers have tried going round this by having many accounts but even with ten accounts you only get ZW$3,000.00 which is US$10.00 on the street.
That leaves transfers. If a dealer like Tapiwa, can buy forex and make the payment via a transfer of funds from his account to the sellers account he can make some very big margins. Here’s how.
If he can liaise with someone who works for a bank to “organise” for him to be able to withdraw say ZW$10,000.00 in the morning, this will get him, at yesterday’s rate, US$1,000.00 on the street. He then finds buyers for these US dollars at the transfer rate, meaning in exchange for the US$1,000.00 cash he gets a transfer of ZW$350,000.00 into his account. In just two transactions he has just multiplied his Zim dollars by thirty-five.
The idea though, is for him to be holding US dollars at the end of the day, as overnight, the Zim dollars could lose a lot of value. So what he does is find a customer, usually a company that wants to pay for a service or product in Zim dollars and does not want the risk of getting their bank accounts associated with forex related transfers, which are illegal. He offers to do the payment for them from his account and negotiates a rate of US$1.00:ZW$200.00 with them. This is better than anything they can get on the street and has no paper trail for them so they take it. Tapiwa now has US$1,750.00. In just one day he has made a 75% return on his money.
This is one example. There are many other convoluted ways of exploiting this three tier exchange rate system in arbitrage deals that add no value to the economy and help push inflation up.
There are two ways of doing the bank transfers involved in these transactions. One is to stand in a bank queue, fill out an RTGS (Real Time Gross Settlement System) form and submit it for processing. The queues are long and so this is not appropriate for a high speed wheeler dealer.
The second is to go to an Internet café and do an online transfer. This is much faster and it makes it possible to do many more transactions in a day. It also solves a major problem for forex traders, that of having to visit many banks over and over again in the same day. Most of these dealers are multi-banked to facilitate speedy transactions with clients that have accounts at any bank. With Internet banking he can service clients from four or five different banks easily within a thirty minute stint in the café.
For this reason, Internet cafés in Harare have a new niche clientele. In many cafés in central Harare it’s non-stop business all day.
No one really knows who decides what the rates are, but at any one moment any dealer anywhere in Harare will know exactly what the rates are like. They will then play with the rates to their advantage, making a profit with each transaction.
The police have caught on to this trend and have made several raids on Internet cafés but, like the street dealers that continue to multiply, their Internet café counterparts have not been disheartened.
The banks also seem to have had enough. Several months ago the NMB bank online facility to enable inter bank transfers “stopped” working and hasn’t been fixed since. Just last week CBZ disabled their online banking system with no explanation.
Some dealers are fronts on behalf of companies that want to source forex so they can buy inputs outside the country. Some are sheer profiteers. Others are looking for forex to finance their next cross-boarder trip where they will bring hard-to-find commodities into Zimbabwe for sale.
For all of them though, this is how they put food on the table.
Internet banking has grown rapidly in Zimbabwe. Last year FBC announced that over half of all of its banking transactions by value were done online.