Why This Is The End Of The Road For M-Pesa In South Africa For Now

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Written by Dana Sanchez

Vodacom, South Africa’s largest mobile network, said Monday it is pulling the plug on mobile money product M-Pesa, a service that thrives in Kenya and has 25 million active users globally but failed to catch on in Africa’s most advanced economy.

Financial inclusion for about 75 percent of South Africans in the country’s advanced banking sector and lack of demand are the main reasons why Vodacom’s M-Pesa failed there, an analyst said, according to MyBroadband.

Vodacom hoped to sign up 10 million South African users when M-Pesa first launched in South Africa in 2010.

Vodacom re-launched M-Pesa in 2014 in South Africa, but said in its 2015 annual report that while 1 million people had registered for M-Pesa, only 76,000 were actively using it, TelecomPaper reported.

Vodacom should never have launched M-Pesa in South Africa in the first place, said Arthur Goldstuck, managing director of local technology research firm World Wide Worx, in a Fin24 interview.

“Since the day of the launch in 2010 in South Africa, I’ve questioned the viability of it in this country because of the fact that the success factors for M-Pesa in Kenya were not present in South Africa,” Goldstuck said.

Vodacom, a subsidiary of the U.K.-based Vodafone, said it will continue offering M-Pesa in markets where banking access is limited including Mozambique, Tanzania, Lesotho, and the Democratic Republic of the Congo, Quartz reported.

“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,” Vodacom CEO Shameel Joosub said in a statement.

The mobile money-transfer service will end June 30 in South Africa.

Vodacom’s decision to discontinue service June 30 in South Africa will not affect customers in Tanzania, Lesotho, Mozambique and DRC, where the product continues to grow exponentially, the firm said.

M-Pesa enables text message financial transactions on mobile phones.

Vodacom sees little prospect of achieving a critical mass of users in South Africa, Joosub said, according to Reuters.