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Why did M-Pesa fail in South Africa?

South Africa’s largest mobile operator Vodacom recently announced it will be scrapping its M-Pesa mobile money transfer system in Africa’s second-biggest economy.

For many pundits the move comes as a surprise, because M-Pesa has been a huge success in

M-Pesa: The good and the bad news

other African states – especially in Kenya where it was launched in 2007, allowing people without bank accounts to transfer money quickly, easily and safely using their mobile phones.

According to a World Bank report, only 12% of Africans with bank accounts use mobile money services. However, this is not the case in South Africa. Mobile phone usage is high – nine in 10 South Africans own a mobile phone – and a third of these are smartphones, according to figures from the Pew Research Center.

Yet South Africa has the most technologically advanced, financially liquid and accessible banking system on the continent. About 75% of adults in the country have bank accounts, a survey done by technology research body FinMark shows.

In a statement, Vodacom Chief Executive Shameel Joosub said the success of M-Pesa in South Africa hinged on “achieving a critical mass of users”. But Vodacom has struggled to find the customers. That is the problem.

Wrong partner?

M-Pesa was launched in South Africa in 2010. Trading on its position as the leading mobile operator in the country, Vodacom thought it could build an M-Pesa customer base of 10 million in three years. However, six years on the service only has 76,000 active users in South Africa, although many more have been registered.

A few reasons have been cited for its failure.

Vodacom had to partner with a bank to provide the financial service on its platform. Nedbank was its choice – and although it is one of the largest banks in South Africa, the perception is that it caters for middle-class and high-income earners. These customers already have an array of banking services and platforms through which to conduct their business.

South Africa is also a country where banks have actually made significant inroads in both urban and rural areas. Though untested, it is said that there is a bank, branch or ATM within a 20 km (12-mile) radius in any urban or rural settlement.


So the challenge in South Africa is not about access. Rather it is the ability to use various technologies to support how people save, spend and invest their money. In this regard, banks in the country are focused on developing new financial products that will enhance savings schemes and pension funds.

Mobile phone operators, on the other hand, are working towards opening more secure platforms – for instance linking banks, hospitals, retailers, insurers, municipalities and revenue services. There is definitely still a case to be made for getting the unbanked population to open up accounts. And statistics show this is the trend.

A 2015 KPMG report revealed that South African banks are growing at an annual rate of 7% and to date the industry has assets worth $361bn (£250bn). The prospects for financial services are good.

Vodacom remains upbeat about the market in South Africa despite the failure of M-Pesa. “We remain of the opinion that opportunities exist in the financial services environment and we will continue to explore these,” Mr Joosub said.

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