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“When you tax mobile money, and it’s an easy one to tax, it does have repercussions,” Vodacom Group CEO Shameel Joosub tells The Africa Report.
On Monday 16 May, the Vodacom Group published its preliminary results for the year ended 31 March 2022 that show:
- South Africa contributed R80.8bn to group revenue, underpinned by sustained demand for connectivity, new services – such as digital, financial products, and Internet of Things – and moderate wholesale revenue.
- Revenue from international operations grew by 0.6% and was negatively affected by the mobile money levies and biometric requirements for users in Tanzania.
- Vodacom added 5.9 million customers while financial services customers, including those of Safaricom, a group associate, increased by 2.9 million to 60.6 million. The group has 129.6 million customers across its geographic footprint, which includes the Democratic Republic of the Congo, Ghana, and Mozambique.
“The Tanzanian one [mobile money service], […] has not worked out well from the perspective of financial inclusion. It dropped volumes up to 40% when the initial … [levies] were put in, which … [we] partially recovered,” Joosub says.
“Governments have to remember that mobile money allows you to formalise an informal economy. It is beneficial for free lending, consumer advances, and so on,” says Joosub. “We continue to engage with the government in the hope of further [mobile money] levy reductions [in Tanzania].”
Once finalised, the acquisition from the Vodafone Group of a 55% controlling stake in Vodafone Egypt, which is pending approval, will add 64 million financial services customers to the South African telco’s existing base.
Post-acquisition, the R41.1bn Vodafone Egypt transaction will give the Vodacom Group access to 39 network sites and spectrum. The additional network infrastructure will make Vodacom one of Africa’s largest tower owners.
“As we evolve from telco to tech-co, access to skills is critical. Across the Vodafone Group, Egypt is seen as [an] IT skills powerhouse. We look forward to closing the transaction in the near term, although this is subject to regulatory sign off,” says Joosub.
Vodacom Group CFO Raisibe Morathi says: “In Egypt, we indicated that 20% [of the transaction] will be funded as debt and 80% through the issuance of shares. As soon as the regulatory approvals are completed, we will raise that [20% consideration] … in the market.”
Ethiopia has signalled to the Safaricom-lead consortium – which won the bid for the country’s first private network operator telecoms licence, and in which Vodacom has a 6.2% direct interest – that a financial services licence might also be in play.
“Hopefully, that comes to pass before [commercial] launch,” says Joosub.
I had a fruitful discussion with the Global Lesdership Team @Vodacom Group CEO Shameel Joosub and @SafaricomPLC CEO @PeterNdegwa_ ,and the @SafaricomET MD @AnwarSoussa on preparations underway for commercial launch. The progresses made so far are commendable. #Ethiopia pic.twitter.com/ElPPzuNHpt
— Eng. Balcha Reba (@EngBalcha) December 17, 2021
Joosub says the civil unrest in Ethiopia caused delays in the commercial launch of the consortium’s operations and services. “We were planning to launch earlier. We are encouraged by the fact that things are getting better. At the moment, we are busy with rollouts. We’ll launch later this year.”
The Vodacom Group has made provision for start-up losses, and anticipates that the operations in Ethiopia will break even in four years.
Joosub says Vodacom is keeping a pulse on the African Continental Free Trade Area (AfCFTA) agreement developments around cross-border payments.
“We are monitoring [the AfCFTA payment space],” Joosub says. “We are building our international money transfer capabilities across our markets.”
In South Africa, where Vodacom is the market leader, the company is separating its towers.
Vodacom is also fast-tracking rural coverage and 5G rollout after acquiring high-demand spectrum, and plans to bridge the digital divide through a proposed 30% acquisition of the Community Investment Ventures Holdings’ fibre assets.
What they have done now for South Africa is something more sophisticated than a traditional M-Pesa or mobile money service.
The transaction is being assessed by the Competition Commission and the Independent Communications Authority of South Africa.
According to the group, when the transaction is concluded “Vodacom will gain exposure to fast-growing businesses and South Africa’s largest open-access fibre players, including Vumatel and Dark Fibre Africa”.
In October 2021, the company introduced a super-app, VodaPay that is supported by Alipay technology, to the South African market. Through VodaPay, Vodacom has introduced services including loans, person-to-person payments, and personalised shopping.
Thecla Mbongue, a senior analyst at Omdia, says VodaPay is Vodacom’s answer to its failed attempt to introduce M-Pesa services in South Africa.
“Vodacom’s move was inevitable. They have to be part of the fintech ecosystem. In the past they’ve tried a few copy-and-paste ventures of M-Pesa, which didn’t work out because of the high levels of banking penetration in South Africa,” says Mbongue.
“What they have done now for South Africa is something more sophisticated than a traditional M-Pesa or mobile money service. The super-app integrates fintech services,” says Mbongue.
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