Travellers in a quandary as American Express cuts off Zimbabwe

Local reports indicate that American Express had instructed its South African office to give notice to Zimbabwean banks to stop issuing American Express traveller's cheques within 30 days from August 31, 2008. However, they would continue to redeem traveller's cheques issued from other countries, allowing them to earn foreign currency.

A local bank executive said American Express dominated Zimbabwe's market, with market share of at least 90%. South African banks that issue money orders through the Zimbabwean banks hold the balance. The majority of these money orders are however redeemable only in South Africa.

“Most travellers will be left with the option to travel with foreign currency,” a treasury manager with a local bank said. “The problem is that exchange control regulations prohibit travellers to leave the country with more than US$1000 in cash, but there should be some flexibility as American Express terminates its contract with local banks,” he said.

Moreover, because of the stringent exchange control regime, foreign currency account holders could only withdraw small amounts of foreign currency from their accounts when travelling, getting the balance in American Express traveller's cheques.

Some bank officials said the alternative would be to push for the use of credit cards, but only a small segment of the domestic market could afford them.

A few banks are still issuing VISA cards, but those that can be used offshore are tied to individual or corporate US dollar or pound sterling foreign currency accounts. Deposits in one's account determine spending limits on these cards. Kingdom Bank, which issues American Express (AMEX) cards, said cardholders had to deposit a surety of US$5,000 or US$10,000 for the green or gold cards respectively.

“You cannot withdraw that money. We just keep it in the account as security,” an official with Kingdom Bank said, who said the AMEX cards were unlikely to be affected by the ban on issuing of traveller's cheques. Few Zimbabweans would afford such hefty deposits.

Other international cards like MasterCard, Diners and Maestro used to be common in the country but banks have stopped issuing or accepting them due to the economic crisis that has left them with huge offshore debts in fees and costs.