Zimbabwe Stock Exchange-listed tech firm, Cassava Smartech has cut down on its agency and branch network following a sharp drop in transactions carried out under the company’s cellphone-based money transfer, financing and microfinance platform and the outbreak of the Covid-19 pandemic, The NewsHawks have established.
The government’s decision to cap daily and monthly transactional limits in April this year to tame informal foreign currency transactions not only resulted in the reduction of intermediated money transfer tax (commonly known as the 2% tax) for government, but could have also resulted in job cuts for thousands of agents dotted around the country. Daily limits now stand at $5 000 (about US$50). Apart from the transactional limits, the government also introduced several measures such as the suspension of agent-to-agent transactions; ban of use of multiple wallets by individuals effective 8 September 2020, suspension of some EcoCash user categories and functions; suspension of agents with transactions above $100 000 and new requirements for their re-registration.
Over-the-top (OTT) services have traditionally been a key revenue stream for the telecoms firm following the setting up of EcoCash in 2011, but this changed after the telecoms giant unbundled, resulting in the setting up of Cassava Smartech.
An observation by The NewsHawks showed that many agents in Harare’s townships have been shut.
Following the unbundling, Econet revenues are now increasingly driven by voice calls and data usage while the group’s unit, Cassava Smartech, is running its OTT services like EcoCash.
The announcement of a national lockdown to contain the respiratory ailment that has claimed more than 200 lives in Zimbabwe and hundreds of thousands across the globe saw many companies shutting shop.
The strict regulations and slowdown in business have resulted in most Econet and Cassava employees working from home, instead of their traditional work stations.
Contacted for comment, Econet spokesperson Fungai Mandiveyi said the group had not closed its branches, but was observing Covid-19 regulations.
“In view of the health and safety threat imposed on us by the Covid-19 pandemic, we have aligned our business operations with WHO (World Health Organisation) guidelines of social distancing, mandatory masking up and hand-sanitising. We have introduced these protocols in all our shops and working spaces,” Mandiveyi said in a written response.
“To ensure the continued provision of essential telecommunication and related services, all our shops remain open countrywide (we have not closed any shops), with our staff observing and maintaining all the required health protocols within our shops as they serve our customers.
“For the convenience and safety of our customers, we have developed digital self-care platforms that give alternative touch points for service support, ensuring our customers can reach us from anywhere at any time, and further reducing the need for customers to travel to our shops for service support.”
Last month, the Zimbabwe Revenue Authority (Zimra) missed its third-quarter target on intermediated money transfer tax–the controversial 2% charge on electronic transactions–after the Reserve Bank of Zimbabwe (RBZ) tightened screws on mobile money platforms in a bid to contain a rampant informal foreign currency trading market.
Official statistics obtained from Zimra show revenue performance for the quarter ended 30 September plunged due to the crackdown on Econet and other mobile money networks–costing the tax collector $1.9 billion; 32.2% of the revenue head target.
During the same period last year, the 2% tax registered over 400% revenue increase, but after the crackdown its tax contribution dwindled.
“The intermediated money transfer tax (2%) lost its momentum, missing the target of $5.9 billion by $1.9 billion and contributing only 6.86% to total revenue for the quarter,” Zimra board vice-chairperson Josephine Matambo, said.
Cassava Smartech recently said in a trading update that its mobile money transfer unit registered an 11% transactional value decline in the face of a stricter operating environment imposed by the central bank.
The nature of transactions processed on the EcoCash platform, which are high volume and low value, has seen quantum on the platform going down to about 19% of the total value on the National Payments System, from 30% in 2019.
In its trading update for the period ended 31 August 2020, Cassava said despite the reduced contribution of EcoCash, its performance shows that, the group’s revenue diversification strategy has seen some resilience spurred by the exponential revenue growth in the upcoming Insurtech and the Vaya Technologies businesses. – STAFF WRITER
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