Why Vodacom mobile money users shun it

Tanzania’s mobile phone operator Vodacom lost Tsh103.8 billion ($44.34 million) worth of revenues after 1.3 million customers dropped mobile money services due to a levy imposed by the government in July last year.

The telco, which is listed on the Dar es Salaam Stock Exchange (DSE), disclosed through its latest annual report (2022) that the levies significantly increased the cost of mobile money transactions.

Its M-Pesa revenues for the 12 months to March 31 dropped by 7.6 percent to Tsh329.6 billion ($140.8 million) as a result of the contentious levy, according to the report.

“While the impact of the levy is difficult to dismiss, we are encouraged with an increasingly open-door attitude from the government, with respect to this matter,” says Group chairman Justice (Rtd) Thomas Mihayo.

“We remain optimistic that together with the government, we will find solutions that will progress further realisation of benefits that technology can deliver to the country and financial inclusion. The introduction of mobile money levy in the year was an unfortunate development for financial inclusion in Tanzania.” In June last year, the Tanzanian government amended the Electronic and Postal Communication Act and imposed a levy of between Tsh10 ($0.004) and Tsh10, 000 ($4.27) on mobile money transactions, depending on the amount sent and withdrawn.

However, following a public outcry, the levy which became effective on July 15, 2021 was reduced by 30 percent in September 2021 and a further 43 percent from July 1, translating into a total reduction of 60 percent since the charge was introduced.

“The decision will reduce the end-user charges. We believe by unlocking the growth potential in M-Pesa we can meaningfully address financial inclusion,” says Hilda Bujiku, the telco’s acting managing director.

According to GSMA, the average transaction fee increased from three percent to 369 percent depending on the transaction, following the introduction of the new mobile money levy.

For example, the average fee for a transfer between Tsh40,000($17.08) and Tsh49,999 ($21.36) increased by 369 percent from Tsh407($0.17) to Tsh1,907 ($0.81). The new levy applies in addition to value added tax of 18 percent and excise duty on mobile money transfer and withdrawal fees of 10 percent making mobile money transactions in Tanzania very expensive compared to other East African countries.

GSMA, the global mobile phone operator lobby group through a report titled “Tanzania Mobile Money Levy Impact Analysis” dated March 2022, shows that mobile money transactions became more expensive in Tanzania on account of the new levy.

SOURCE: THE EAST AFRICAN