Harare - Data by the Central Bank shows that Zimbabweans have drastically reduced their usage of electronic payment platforms in favour of cash in the aftermath of the 2% money transfer introduction.

Likewise the overall transfer of money in both volume and value terms has also traced southwards since the tax’s introduction in October 2018.

A November report by the central bank shows that the volumes of RTGS transfers came off by 16% to 477.4 million transactions which was the lowest in 20 months.

Likewise the value of RTGS transfers came off by 4% to $7.92 billion from the October level. RTGS accounts for 58% of the total transactions value across all platforms.

Mobile money transfers which rank second in terms of value, recorded a 14% plunge to $3.96 billion in November, its lowest in 5 months. In terms of volumes mobile transfers came off by 33% a 7 months low.

Mobile money accounts for the most significant chunk of transfers by volumes at 85% of the total and together with RTGS, rank as the most utilized platforms in terms of money transfers in Zimbabwe.

As activity on these platforms came off, Zimbabweans increased their demand for cash, with cash withdrawals going up by 11% to $19.9 million which is its highest level in 12 months.

There are two market dynamics which tilted significantly in the aftermath of the 2% tax announcement and separation of nostros.

The cost of transacting on digital platforms immediately increased while the premium on cash either in bond notes and USD increased on the parallel market. Trading in most goods spontaneously followed the trend in parallel market exchange rate and the cost using cash was relatively cheaper.

The full impact of the 2% tax is yet to fully unravel, although government and its phony media has already concluded that it is a success. Little attention has been paid to the opportunity cost mainly through inflation and the ready hazard on the 2019 budgeted expenditure.