AN irretrievably broken down relationship between banks and Paynet Zimbabwe, which until June this year was Zimbabwe’s sole bulk payments enabler, may have significantly cut down turnaround time for transactions amounting to $6 billion monthly, according to bulk payments system’s proprietor Cambria Africa Plc.
The Alternative Investment Market (AIM) listed group has raised fears the collective decision by banks, which has thrown the banking sector into a bulk payments crisis that sees transactions take several days or weeks to go through, may have some ramifications on the overall economy.
However, Bankers’ Association of Zimbabwe (BAZ) executive director Sij Biyam, said banks had completed development of an alternative bulk payments system, the Bulk File Interchange System (BFIS), which banks were ready to put into operation.
While project manager of BFIS, Desmond Takwawira was not available for comment, Biyam said banks were happy with the new bulk payments system, which immediately replaces Paynet’s platform.
Cambria Africa chief executive Samir Shasha, said there was a strong co-relation between the velocity of money and economic production, which might negatively impact Gross Domestic Product (GDP).
Simply put, velocity of money is the rate at which people spend money. The velocity of money is usually measured as a ratio of Gross National Product (GNP) to a country’s total supply of money.
The remarks follow an impasse between the parties over the banks’ collective refusal, through the Bankers’ Association of Zimbabwe, to continue paying service fees to Paynet in US dollars.
This resulted in Paynet suspending the banks from its bulk payments system while the banks on their own volition eventually opted to disconnect from the platform altogether, as an industry.
Shasha told Business Weekly in an exclusive interview that the Bankers’ Association had also pressured banks that were willing to remain on the Paynet platform to disconnect fearing that some would “come to terms with us”.
The Cambria executive said while suspended banks could still receive payments, but could not make outward bound transactions on the Paynet system, BAZ allegedly pressured all banks to disconnect all ties with Paynet’s system.
Individually, the banks had contracts with Paynet denominated in US dollars until the Reserve Bank of Zimbabwe (RBZ) gave a directive for the conversion of all electronic US dollar or RTGS dollar balances to local currency and floated the exchange rate in February.
It is against this background that the Cambria CEO said that there was no need for the banks to act collectively and “as a cartel”, in taking a collective position to refuse to pay service fees in US dollars.
At that point, banks had outstanding invoices amounting to US$430 000, while Paynet said it suffered nearly US$200 000 exchange losses between February and April when trying to convert payments in local currency at the going exchange rate of 2,5 to 1 between RTGS and US dollars.
Cambria has since assigned its lawyers to sue for US$100 million damages against BAZ for loss of business caused by what Shasha called anti-competitive business practice of imposing commercial decisions on the association’s members.
Even the proposal to assign its receivables to Payserve, which would invoice in US dollars and in turn Paynet Zimbabwe, which had agreed to remit 65 percent of proceeds back to Zimbabwe after paying licence fees, was refused by the banks, as they would not even negotiate.
The Cambria CEO said technology rights to the payment system were owned by Payserv, a subsidiary of London junior market listed Cambria Africa Plc, which due to challenges of access to US dollars in Zimbabwe, is already owed US$1,3 million.
Shasha said Paynet used to carry $6 billion dollars through its system every month, which was a significant portion of the country’s overall GDP, of which the company got 2 percent of the value.
“That is what these banks have put at risk. Six billion of GDP is taking longer to process and its velocity is dropping . . . the money supply times velocity of money equals the quantity of production in the economy; times the price level.
“So when you drop the velocity you are effectively dropping the GDP. This is how the banks have impacted the country, but they are saying that there is no problem,” Shasha said.
“What has John Mushayavanhu (FBC Group chief executive) said; ‘hasn’t anybody received their salaries, I don’t know what this noise is all about.”
The Cambria CEO said Paynet’s bulk payments system, while it was the best available to local banks, was not as efficient and secure as it should be and they intended to invest up to US$2 million to improve it.
Shasha said while they would allow all banks to remain on the Paynet system, even if suspended, BAZ forced every bank to shut down the Paynet gateway and close all avenues for any possible further engagements. BAZ executive director Biyam this week said banks had developed an alternative bulk payments system, Bulk File Interchange System (BFI) and were happy with its functionality.
He said banks made the decision to develop an alternative system because Paynet refused to be paid in local currency. He said payments were made for the service, but were all returned to the banks.
“Banks have started using the new system. It has been completed and delivered to the banks,” he said, adding the regulator, RBZ, and the Ministry of Finance and Economic Development had been informed about the new system.
Shasha, however, argued that if they accepted to take payment in local currency, it would see them receiving payment after 80 days and given exchange rate instability; this would result in frequent exchange losses. Since February, when the interbank was introduced, the exchange rate between the RTGS dollar and US dollar has moved from 2,1 to 1 to about 9 to 1.
“We are competitive in any currency and if we had the ability to buy currency on the interbank market, none of this would have happened,” Shasha said.