For the second time, M-Pesa has failed to amass customers in South Africa, and Vodacom has no other option but to terminate the service, come June 30.
Vodacom, South Africa’s largest mobile network, has failed to attract users to its M-Pesa service in the country forcing the company to end the mobile money-transfer service.
The network announced on Monday (May 9) that it will shut down its M-Pesa service by June 30.
Unlike in Tanzania and Kenya where the M-Pesa uptake was fast, in South Africa, it failed to collect such large number of users. The service was launched in the country in 2010 with an aim of reaching 10 million users in South Africa in five years.
In their 2015 report, Vodacom said that of its 8 million M-Pesa customers in Africa, one million were registered in South Africa, with only 76,000 active users.
“Vodacom’s decision is based on the fact that the business sustainability of M-Pesa is predicated on achieving a critical mass of users,” Vodacom CEO Shameel Joosub said in a statement. “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,” he added.
Following the new development in South Africa, Vodacom, a subsidiary of the UK-based Vodafone said it would continue to offer M-Pesa services to its customers in Tanzania, Lesotho, Mozambique and the Democratic Republic of Congo, where the product continues to grow exponentially.
M-Pesa was first founded in Kenya and boasts a success story in the country, and has also gained a foothold in several African countries.
The success stories in such countries were highly contributed by limited banking facilities, especially in the rural areas. Thus, M-Pesa became a solution for the majority of people who were unbanked.
According to Reuters, M-Pesa has about 16.8 million active users in emerging markets, supporting transactions of $1.2 billion each month.
It is due to Kenya’s success story that many companies push to replicate the service in other countries like South Africa, but due to the different market needs, the service fails to get traction.
First launched in 2010 in South Africa, M-Pesa was faced with a slow uptake. In 2014 with the help of Michael Joseph Vodafone director of Mobile Money and founding Safaricom CEO, South Africa relaunched the service.
Barely two years after the relaunch, the service is being terminated in South Africa, still due to slow uptake which Mr Joseph attributed to the fact that most people in the country prefer credit cards.
Moreover, South Africa had already established banking systems that catered even for the unbanked in the rural areas. Already, about 77 percent of South African adults have access to banking services. In places where banks are limited, local banks have introduced small satellite branches which run their own mobile money-sharing services. Thus, M-Pesa could not beat such established markets.
So unlike in Kenya, where during its launch stages, M-Pesa was coming to provide the solution to the unbanked market before other competitors came in, in South Africa, the platform has always been challenging the already well-established competitors for the unbanked market in the country.
Image credit: Reuters/Bogdan Cristel
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