Morris Mpala, MoB Capital Ltd
RTGS, as is generically called, is a system that aid bank to bank settlements of individual banking clients. It is a platform that was devised to deal with the checking system, which was being used in yester-years as it gave “real-time value”. This interbank settlement mechanism was just what the doctor had ordered after a problematic cheque system. Allow me to use “RTGS” to mean balances and or platform interchangeably.
The “instant value” characteristic like your “ZIPIT” transfer was key. Due to funding challenges, human capital in-adequacy and lack of capital to invest in infrastructure it takes longer to execute this function amongst banks.
The RTGS platform is a preserve of the central bank where all banks are connected via RBZ and transactions are done through RBZ. Thus, an autonomous RBZ is key for integrity and policing/compliance matters to the confidence of the banking public. Is it not TBs issuance printing of money that RBZ needs to monitor and control especially Government debt?
RTGS Vs TBs
Government expenditure through funding via TBs issuance increases the RTGS balances on the platform. Salaries, assumption of debts find themselves increasing these figures without any underlying value to it.
RTGS vs Exports
Export incentives through bond notes participation also increases the balances on this platform. Exports proceeds increases real money in circulation and tries to match RTGS balances.
The initiatives of bringing banking to under banked, use of plastic money has seen the surge in these balances. Coupled by the lack of private sector funding has led to the ballooning of these balances though RBZ is trying to mop it out by coming up with various funding options for private sector.
The huge balances sitting on $8-$10 billion have caused havoc on the market. Its incremental value has increased the gnashing of our economic teeth as it has become a source of all ills in the economy. These balances are more than real money in circulation, which has led to serious speculators and arbitragers on the market to the detriment of the entire economy. Like they say idle funds are fertile ground for economic shenanigans.
The amount of money that is hanging without being recorded on any bank balance has increased. Payment made but not received for a period of time messes the bank balances (affects lending), increases prices, affects cost of doing business, wrecks banking confidence and trust, affects traders on the market, gives premium to pricing of goods/services. It is a perception thing, which is critical in money matters so the instant value to RTGS is critical and of paramount importance.
RTGS vs Parallel market
This is an egg and given story. Which is fuel which? With the balances increased demand for real money increased and with it the cost of acquiring the said real money to the upward surge in prices across.
The more RTGS balances increase the more the parallel market seeks higher premiums as a safe haven for the electronic bank balances. With the miss match in volumes between these balances and real money there is no price equilibrium. It is not matching the nostro balances from exports proceeds and this is a challenging scenario. This has affected market confidence as some think of it as a pyramid scheme to mop real money.
At MoB Capital we have called these balances imagery currency or bytes dollars as they exist electronically without tangible value attached to it. It is an illusion of value not backed by real cash or gold reserves. It is paper money (toilet paper-like money), which is like a flash and at anytime it can disappear.
In some instances it has given rise to profits to banking sector, increased retail revenues, led to settling of debts, increased buying power to customers etc but to the detriment of the entire economy by violating basic fundamentals of creating money with no underlying asset.
Can these RTGS balances/electronic money be classified as bad money? Bad money vs Good money story still applicable? Are bond notes fuelling these balances? Is the curse of cash lite economic inclinations? A curse of not having your own currency and a curse of having a surrogate currency? Or it’s purely a mindset change? Can Government mop these through TBs issuance (again TBs) or just curtail expenditure coupled with other corrective austerity economic strategies.
The financial love triangle
The love triangle between US dollars vs Bond notes Vs RTGS balances with the populace being the playground will continue until the productivity issue is addressed adequately. Does inflation ring a bell?
Some of the things we economically do oblivious of the challenges we are creating beyond us. As you celebrate your humongous RTGS balance think about the economy in the grand scheme of things.
IF YOU LIVE IN BULAWAYO PLEASE CONSERVE WATER
IF YOU LIVE IN ZIMBABWE PLEASE USE ELECTRICITY SPARINGLY SWITCH OFF SWITCHES (SOS)
IF YOU LIVE ON PLANET EARTH PLEASE PRESERVE THE ENVIRONMENT
Morris Mpala (Mr Brown) is the managing director for MoB Capital Limited, a Bulawayo-headquartered micro-finance institution with footprint across the country.