Vodacom South Africa to discontinue M-Pesa service come July 2016


Vodacom South Africa has announced that it will discontinue the M-Pesa mobile money transfer service with effect from 30 June 2016 following a thorough review.

In a media release, Shameel Joosub, Vodacom Group CEO said: “Vodacom’s decision is based on the fact that the business sustainability of M-Pesa is predicated on achieving a critical mass of users. Based on our revised projections and high levels of financial inclusion in South Africa there is little prospect of the M-Pesa product achieving this in its current format in the mid-term.”

With regard to customers, Joosub says: “Vodacom is fully committed to mitigating any inconvenience to customers impacted by the decision and assures all M-Pesa South Africa customers that their funds remain safe and readily accessible. We remain of the opinion that opportunities exist in the Financial Services environment and we will continue to explore these.”

Vodacom launched the M-Pesa service in South Africa in September 2010 Vodacom in partnership with Nedbank. At the time of launch, projections were that the service would attract 10 million users in three years, but this has not been the case.

At the end of March 2015, Vodacom South Africa had one million registered M-Pesa customers, but only 76,000 of these were actively using the service (according to the number of subscribers who use the service in the past 90 days) according to an article by Mobile World Live.

M-Pesa’s slow growth in South Africa has been attributed to the fact that most of the country’s population have formal bank accounts, with Genesis Analytics stating that 70% of South Africans have at least one bank account with an established financial institution which have their own banking products which directly compete with M-Pesa.

Vodacom seems to admit this in the statement when it states: “In other markets where financial inclusion is limited and where there is a more supportive macro environment, M-Pesa continues to gain solid traction based on exponential growth in customer acquisition. Kenya and Tanzania are prime examples of this. It is important to note that this decision does not affect M-Pesa customers in Tanzania, Lesotho, Mozambique and the DRC, where the product continues to grow exponentially.”

M-Pesa was first launched in Kenya by Safaricom in early 2007 and has since experienced phenomenal growth. The service currently has over 19 million subscribers who have transacted over Kshs 124.4 billion in person-to-perosn transfers according to latest statistics from the Communications Commission of Kenya (CA).

Other markets where variants of M-Pesa have been launched include Tanzania, Afghanistan, India, Romania, Mozambique, Lesotho and Egypt.