The Reserve Bank of Zimbabwe (RBZ) acted within its mandate when it suspended EcoCash mobile money agents from conducting financial transactions to curb abuse, the High Court has ruled, and so there can be no interdict stopping it from doing so.
The court ruling suggested the agents, rather than EcoCash, should have approached the courts if they disagreed with the RBZ, and that even then they should have sought a review of whether the RBZ action was reasonable rather than a ban on the RBZ exercising its legal powers.
As a result of the failure of the interdict application, RBZ and the mobile money operators were yesterday meeting to discuss what could be done to restore agents' business without opening doors to abuse.
EcoCash, Zimbabwe's dominant mobile money platform, had approached the High Court in an urgent application seeking an interdict to stop the RBZ from suspending its mobile money agents, but the court ruled it cannot interdict a lawful act.
The RBZ directive, early this month, was issued to combat alleged abuse of their accounts by many EcoCash agents who were illegally dealing in foreign currency, identified as a cause of the rapid rise in the black market exchange rate.
This followed the central bank's analysis of EcoCash returns that showed that even the revised and much lower limits continued to be abused by many of the agents.
In most cases, the value and volume of transactions undertaken by high-threshold agents were inconsistent, not only with their business profiles and declared line of business, but with normal mobile money agents' business.
It was not clear whether EcoCash will appeal the High Court decision after the RBZ convened a meeting with mobile money platform representatives. Both parties spent the large part of the afternoon locked up in a marathon meeting, to find a way forward.
EcoCash lawyer Ms Beatrice Mtetwa confirmed to The Herald that both parties were in a meeting that was called by the central bank and could not say what is the next move after the court ruling.
"We wait for the outcome of the meeting. We will hear from our client on the way forward," she said.
Dismissing the application, Justice Webster Chinamora ruled that the relief sought by EcoCash was tantamount to proscribing the RBZ from exercising its functions in terms of the law.
"It would be a disjunctive for an executive functionary to exercise its legitimate statutory mandate, and then have the court undermine that through an interdict," he said.
It was the court's view that the mobile money platform should have challenged any perceived irregular exercise of administrative power via an application for a declaratory or review, but chose the wrong method to vindicate the rights to seek protection.
The court also found the objection by RBZ lawyer Mr Addington Chinake that EcoCash could not interdict an act done by operation of law appealing and so upheld the point raised.
Thus, the mobile money platform sought to approach the court through the back door instead of the front door, said the judge.
In view of his conclusion on the issue of EcoCash's locus standi, that is the required legal standing, the fatal defect in the provisional order and that it is incompetent to interdict something done by operation of law, Justice Chinamora found it unnecessary to delve into the merits of the case.
The judge wondered why the mobile money platform made the application instead of the agents whose accounts had been closed.
"Undoubtedly, it is the agents whose accounts were closed who have locus standi to apply to the court alleging that the respondent's action was unjustified since they have not flouted the law or abused the EcoCash platform."
Apart from relief sought to unfreeze the accounts frozen in terms of the central bank's directive, EcoCash asked the court to order the upliftment of all the restrictions imposed on the accessibility of the EcoCash system.
But Justice Chinamora found that ordinarily, interim orders become operational or executable upon being granted.
"The consequence is to allow the agents to access the unfrozen accounts and start operating them. Yet the perceived abuse of those accounts is the harm that the directive seeks to prevent pending relicensing of the agents affected by the directive," he said.
The directive of May 4, 2020, ordered the closure of accounts of EcoCash and NetOne OneMoney individual agents who were transacting above a monthly threshold of Z$100 000 after transactions totalling $75 million were recorded.
The suspension of the mobile money agent lines and accounts across all networks was to facilitate investigations into potential illegal foreign currency activities.
While EcoCash, argued that it has 11 million subscribers and benefits people from all parts of the country, that had been affected, the RBZ action had the effect of limiting EcoCash customers from accessing its services through its agents as most of them have been suspended.
The mobile money platform is the most widely used payment platform in the country and serves the unbanked in accessing financial services, which include the purchase of basic amenities such as electricity.
The majority of financial transactions in Zimbabwe are conducted on mobile platforms with EcoCash accounting for about 95 percent of the mobile volumes with the remainder handled by NetOne's OneMoney.
But preliminary investigations by the RBZ's financial intelligence Unit (FIU) showed that transactions valued at more than $75 million were being executed on the agent lines even though the nature of their businesses did not support such huge money movement.
And what prompted the suspicion was the fact that the value of transactions remained excessively high despite the country being under the Covid-19 lockdown for the past five weeks.
The central bank wants to ensure that people or businesses with the agent lines are bona fide entities and they have to prove the source of their funds.
Also the FIU, which tracks financial transactions in this country, wants mobile operators to enhance their Know Your Customer framework after establishing that there is weak enforcement of this rule given the amount of suspicious transactions.
It is also understood that the intention of the blitz was to stop illegal foreign exchange transactions that could be artificially pushing the exchange rate volatility, thereby fuelling inflation.
Recently, the RBZ suspended some bureaux de change and micro finance institutions over suspected illegal forex activities causing exponential depreciation of the domestic currency. This is widely believed to be the driving force behind a sustained rise in prices, which has seen inflation galloping to new record levels.