HARARE – Zimbabwe's financial system saw a marginal growth of electronic transactions in the year to June 2013, on the back of increased uptake on plastic money and electronic transfers statistics released by the African Development Bank (AfDB) revealed that the value of transactions processed through the Zimbabwe Electronic Transfer Settlement System (ZETSS) slightly surged to $3,5 billion in June 2013, compared to $3,4 billion recorded in same period last year.
In its monthly economic review for August 2013, the AfDB noted that mobile and Internet system also increased from $93,5 million in June last year to $266,7 million in June 2013.
However, on a month-to-month, all payment systems recorded a decline with total transactions through ZETSS slumping to $3,5 billion in June from $3,9 billion recorded in May this year while mobile and Internet-based transactions declined from $364 million in May to $266,7 million in June 2013.
“This is indicative of a slow-down in aggregate demand in the economy,” said AfDB.
Zimbabwe is experiencing a subdued economic and operating environment which has been characterised by an illiquid market and a general tightening in the economy in the aftermath of the July 31, highly contested elections.
AfDB pointed out that according to research by the Zimbabwe Economic Policy Analysis and Research Unit (Zeparu) some of the findings indicated that the contribution of the financial sector to GDP was lowest over the multicurrency period and highest in the period of economic deregulation and liberalisation (1991-1999).
“A lack of confidence in the banking system and the absence of a local currency were the main challenges underpinning the low contribution during the multi-currency period,” noted the report.
The continental financial institution indicated that the research also showed that the current financial regulatory and supervisory model were no longer adequate for Zimbabwe as indicated by bank failures and loss of public confidence in the financial sector.
“It was recommended that Zimbabwe address the weaknesses identified in various pieces of legislation (including the Deposit Protection Corporation Act, the Reserve Bank of Zimbabwe Act and the Banking Act of 2000) and urgently incorporate prudential regulations and guidelines (Basel II and III) into the Banking Act,” it said.
The pan African group pointed out that Zimbabwe needs to implement either the integrated approach to regulation and supervision while working towards adopting the twin peaks model in the long term or directly implement the twin peaks model.
“Both the twin peaks model and the integrated approach are recommended in economic literature for sub-Saharan Africa.
“However, the twin peaks model is highly recommended following the global financial crisis of 2007-2009,” the report indicated adding that capacity constraint issues are best resolved by amalgamating the various multiple regulators and resources, thereby minimising duplications.