Liquidity shortages force people to open bank accounts

Ongoing cash shortages in Zimbabwe are forcing many companies which used to pay their employees in cash to resort to bank deposits.

Like individuals, companies are now accessing very little cash from banks and as a result they are compelling their employees to open bank accounts through which they can receive their wages.

Farm and domestic workers who used to be paid in cash are among the employees that have now been asked to open bank accounts.

This has seen a surge in the demand for new accounts in the banking sector.

The Financial Clearing Bureau (FCB) in its second quarter report said the liquidity shortages had forced people without bank accounts to open accounts.

FCB managing director Alan Goodrich said the only way for companies to pay or receive funds was often through electronic means which made them unable to give employees hard cash.

"Before the crisis, 90% of our employees were paid in cash as this was their preference," he said.

"This has become simply impossible, so staff need to open bank accounts in order to be paid.

"In the agricultural sector, which represents about 70% of the workforce, I have met with farm owners who similarly now require their labourers to open accounts if they expect to get paid.

"I suspect most industries and other economic sectors have experienced similar developments," Goodrich said.

"Even from a personal perspective, we now require our domestic staff at home to open accounts in order to get paid.

"We believe this phenomenon is not only restricted to the formerly employed, but also the informal sector.

"Likewise with small businesses (SMEs) accepting electronic payments have become a necessity of survival given the shortage of cash."

The shortage of cash, coupled with a surge in plastic money usage, which has seen an average growth of 4,2% since mid-June, has led most companies to push employees to open bank accounts.

For companies to receive more cash than what they have, significant deposits must be made of which an average of 80% could be withdrawn, an accountant with a manufacturing concern said.

Employers' Confederation of Zimbabwe executive director John Mufukare said this new phenomenon was beyond the control of employers.

"Right now most banks are releasing between $200 and $300 per day while some are even giving $100 a day to companies," he said.

"So obviously paying people in cash is no longer an option. Even if you were to go to the bank every single day and get your maximum [withdrawal limit], you would still not be able to raise your full payroll.

"I can confirm that employers have been asking employees to open bank accounts so that they transfer salaries into bank accounts."

Mufukare said besides the little cash given at the banks, queuing for the money cost businesses productivity due to the amount of time it would take for an employee to get the money.

Zimbabwe National Chamber of Commerce chief executive officer Christopher Mugaga also confirmed this new trend, saying "it is simply as true as that".

When it comes to domestic workers, employers also use mobile payment platforms such as NetOne's OneWallet, Telecel's Telecash or Econet's EcoCash, the last one being the most preferred.

Tenants are also now paying monthly rentals through bank transfers.

The second biggest bank by deposits, Cabs, however, said new accounts were being opened at a fairly steady rate.

"We continue to open new accounts on a fairly steady basis and I cannot think of any particular spike. I think there has been a steady rate of opening new accounts.

"We have had an upsurge in people trying to find ways of paying staff in other ways than cash.

"There is a huge move in volumes in terms of people using cards to purchase goods that has more than doubled in three months," managing director Simon Hammond said.

While most banks have resorted to plastic money, others such as Barclays are giving South African rand to their clients on top of the United States dollar.

"Barclays Zimbabwe currently operates within the multi-currency system which has eight other acceptable currencies. In line with this, we are providing customers with South African rand through our automated teller machines," Barclays Zimbabwe managing director George Guvamatanga said.

"This is aligned to efforts by the Reserve Bank of Zimbabwe to promote the use of multi-currencies through various initiatives that make it easy for customers to access the different currencies."

Analysts say the cash withdrawal limits for companies and individuals will drive the use of plastic money and in the process accelerate the central bank's financial inclusion thrust.