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Vodacom and Safaricom in the driver’s seat for M-Pesa     

By Xolisa Phillip, in Johannesburg
Posted on Tuesday, 7 April 2020 10:22

Covid-19 has highlighed the volatlility of foreign remittances. to Africa. REUTERS/Thomas Mukoya

M-Pesa, the mobile-money platform that helps millions of people on the continent to make financial transactions, is now under stronger African control.

This follows the successful conclusion of the acquisition of M-Pesa by South Africa’s Vodacom and Kenya’s Safaricom from the UK’s Vodafone, the chief executives of the three companies announced on Monday.

The transaction has been in the works since 2019, when Vodacom and Safaricom announced they had formed a joint venture through which they planned to acquire the full suite of M-Pesa services.

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Journey to growth

The platform is available in Kenya, Tanzania, Lesotho, the Democratic Republic of the Congo, Ghana, Mozambique and Egypt. The acquisition will enable a more aggressive expansion strategy to other markets on the continent where the platform is not available.

The successful conclusion of the transaction will also help Vodacom and Safaricom’s growth ambitions without being fettered by licence fees paid to Vodafone and intellectual property considerations.

In 2019, M-Pesa users conducted 11bn transactions worth R2trn ($107.1bn), while the platform contributed R3.1bn to Vodacom’s revenue. M-Pesa is a big part of Vodacom’s plans to diversity into fintech.

“This … [acquisition] will accelerate our financial services aspirations in Africa,” said Vodacom Group CEO Shameel Joosub.

Joosub explained further that the joint venture “will allow Vodacom and Safaricom to drive the next generation of the M-Pesa platform.”

This was previously slowed down by the fact that Vodacom parent company Vodafone had a stake in the platform.

Control to innovate

Now, however, Vodacom and Safaricom’s transaction will give the two companies “full control of the M-Pesa brand, product development and support services, as well as the opportunity to expand M-Pesa into new African markets.”

Crucially, “the management, support and development of the M-Pesa platform has now been relocated to Kenya, where the journey to transform the world of mobile payments began 13 years ago,” according to Safaricom interim CEO Michael Joseph.

Joseph, a dual American and Kenyan citizen who chairs the Kenya Airways board, was previously at the helm of Safaricom in the mid-2000s, a seminal and transformative period in the telecoms operator’s history. He was on the original Safaricom team which founded M-Pesa and helped grow the company’s subscriber base in its home market.

“We’re excited,” said Joseph, adding, “this … partnership with Vodacom will allow us to consolidate our platform development, synchronise more closely our product roadmaps and improve our operational capabilities into a single, fully converged centre of excellence.”

Vodafone Group CEO Nick Read agreed with Joosub and Joseph about the transaction, saying: “We believe the next step in M-Pesa’s African growth will be more effectively overseen by Vodacom and Safaricom.”

The transaction is also financially neutral to the Vodacom Group, according to the company.

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South Africa factor

Vodacom’s previous attempt in 2010 to introduce M-Pesa in South Africa failed. In 2016, the company scrapped the service in its home market, where it faced stiff competition and could not attract enough users to the platform.

A key impediment to M-Pesa gaining traction was the fact that the country has a well-established banking sector and most adult South Africans have bank accounts.

Furthermore, South African banks have their own in-house fintech products developed for low-income or unbanked consumers, making the market highly competitive.

Because of this, the banks in South Africa tend to be the product innovators, while mobile network operators fulfil the role of enablers – unlike in other markets on the continent where large segments of the population are unbanked.

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