For Online E-newspaper
The East African : Nov 24th 2014
40 The EastAfrican BUSINESS NOVEMBER 22-28,2014 Time to look beyond t≥ansaction flows to mobile money’s ≥eal value COMMENTARY MONDATO INSIGHT “The market for P2B mobile-initiated transactions across Kenya, Tanzania, South Africa, Nigeria and Ghana is likely to grow tenfold over the next 4 years.” current and savings accounts and mobile banking services to dynamic pricing and omnichannel commerce, to the most well-known use case of peer-topeer (P2P) remittances. While it is the latter function M that has garnered the most attention in developing markets (largely due to the spectacular growth of mobile money in Kenya initially and later in other African markets), there is a growing realisation that domestic remittance volumes, while impressive, are a shallow measurement of financial inclusion and the growth potential of MFS. In fact, as the digital finance initiative of the World Bankhoused think tank Consultative Group to Assist the Poor (CGAP) recently noted, the often touted figure of 43 per cent of Kenya’s GDP moving through Safaricom’s M-Pesa amounts to, at the very least, double counting, and a more realistic assessment of its place in the country’s financial system puts its transaction flows on a par with one of the country’s larger commercial banks, such as its MVNO-launching rival Equity Bank. Furthermore, the topline figures often mask the reality that the most common form of transaction, other than cashin or cash-out (Cico), is airtime top-up. A recent IFC study noted that in 2013, 90 per cent of Cote d’Ivoire’s MFS transactions were Cico, and while 24 per cent of the total transaction volume was airtime top-ups, this only obile financial services (MFS) consist of a wide range of offerings, from accounted for 1 per cent of value, compared with 2 per cent and 4 per cent for person-to-business (P2B) by value and volume respectively. As Mondato Insight and oth- ers have previously highlighted, the signs of growth in other areas such as merchant payments (P2B or business-to-business — B2B), while slow, have been encouraging, but remain partly trapped in the chicken-and-egg conundrum. The perception that cash is somehow costless remains widespread and enthusiasm for new technological innovations in the MFS space often clouds recollection of the fact that, irrespective of its actual cost, cash is familiar, easy-to-use and universally accepted. In other words, despite its shortcomings, cash still works relatively well for most people in most circumstances. But, despite the significant challenges to widespread consumer adoption of MFS that remain in Africa and elsewhere, the outlook for growth is encouraging, particularly when attention shifts from the remittance trees to the wider MFS wood. Innovative players are enter- ing the market with a variety of alternative use cases that look set to widen the value that mobile money and mobile financial services bring to all parts of the value chain in almost all market segments. For example, Mondato estimates that the market for P2B mobile-initiated transactions across Kenya, Tanzania, South Africa, Nigeria and Ghana is likely to grow nearly tenfold over the next four years, from $2.9 billion in 2013 to almost $28 billion in 2018. ia or South Africa, sub-Saharan Africa’s volume leaders in mobile P2B transactions by 2018. Nonetheless, on current pro- jections other Mondato research and analysis also points to Kenya being surpassed by competitor economies across multiple transaction categories within just a few years. Nigeria’s MFS P2B market, which is the smallest of these five countries, is predicted to account for $13 billion over the same period. The sheer size of Nigeria’s economy means that even relatively modest growth in non-cash payments, driven by the growth in P2B payments, will ensure that in total value terms the Nigerian market will rapidly come to be the largest in Africa, leaving East Africa’s early adopters in the shade. Digital finance revolution P2P remittances will remain an important driver of consumer adoption in many markets. But in terms of creating value in the economy and furthering the financial inclusion agenda, it is becoming clearer that Africa is moving out of phase one of the MFS and digital finance revolution, as demonstrated by CGAP’s shift from digital finance to “Digital Finance Plus.” On current economic fore- casts, total P2B transactions across Kenya, Nigeria, South Africa, Ghana and Tanzania are likely to grow by over 40 per cent from $640 billion in 2013 to over $900 billion by 2018. While this figure is impres- An M-Pesa agent carries out a transaction. Africa is moving out of phase one of the mobile finance services and digital finance revolution. Picture: File Currently, Kenya leads in the P2B market across the five nations, with transactions worth $1.4 billion in 2013, and Mondato estimates that by 2018 this figure will have grown to $3.7 billion. Remarkably, this would rep- resent Kenya sliding into third place among these five economies for mobile P2B transactions, behind South Africa’s $7.8 billion, while African economic powerhouse Nigeria is anticipated to conduct $12.9 billion worth of P2B transactions in 2018. Despite this relative fall, Kenya’s position as an MFS trail- blazer should see domestic P2B transactions outstrip other noncash forms of payment by around 50 per cent by 2018, which would be an unprecedented achievement in itself and demonstrates the deepening roots of the MFS ecosystem there. It is even possible that recent changes in the regulatory environment in Kenya and the end of agent exclusivity may drive growth higher than the current assumptions that were the basis of Mondato’s model. Furthermore, the mobile share of its P2B market, at 5.7 per cent, will be higher than that of either Niger- sive, the MFS share is likely to grow at over 20 times that pace, but will only account for 3 per cent of the total P2B market, emphasising the enormous potential of this portion of the MFS market. To fully understand the size and scale of both the opportunity and challenges facing MFS in Africa and elsewhere, it is time to start digging deeper into the numbers than just P2P remittances and transaction flows as a percentage of GDP. Mondato is a boutique management consultancy specialising in st≥ategic, comme≥cial and ope≥ational suppo≥t fo≥ the mobile financial se≥vices indust≥y. This a≥ticle can also be accessed at http:// mondato.us1.list-manage1.com Tanzania seeks $1.6 billion fo≥ a majo≥ upg≥ade of its po≥ts By ROSEMARY MIRONDO Special Correspondent THE TANZANIAN government is eking $1.6 billion to upgrade four of its ports in a bid to improve efficiency and open up the country for cross-border business. Harrison Mwakyembe, Minister for Transport, said the move was necessitated by transit demand. The ambitious plan falls under the Big Results Now (BRN) initiative modelled on the Malaysian development strategy. For the trans- port sector, BRN is expected to unlock the potential of the Central Corridor (port and rail) to increase transit capacity. “We currently transport 5 million tonnes of cargo, but we expect to increase it to 22 million tonnes by 2017,” he said. The Dar es Salaam port handled 33.4 per cent of the country’s imports and exports in 2013. The Dar es Salaam Port is cur- rently operating 24 hours with a throughput exceeding the first-year BRN target. “The Dar es Salaam port has increased its throughput from 7.4 million tonnes in 2007 to 13.7 million tonnes in 2013,” said the minister. He said that through the BRN projects, the country is looking $1.6b for at least four investors to inject Tsh2.7 trillion ($1.6 billion) for modernisation of the ports. The Permanent Secretary at the The amount Dar is seeking from development partners to modernise the country’s ports Ministry of Transport Shaaban Mwinjaka said the first investor is expected to bring in Tsh840.5 billion ($500 million) for the upgrading of Berths 1-7 at the Dar es Salaam port, among other developments. The government is also seeking Tsh201.7 billion ($120 million) for the expansion and modernisation of the Kigoma port. Mr Mwinjaka said there is a need to increase the port’s capacity of to handle an expected surge in traffic. The modernisation of Mwanza South port will require Tsh672.4 billion ($400 million). “Plans to modernise Lake Victo- ria ports, including Mwanza, are underway, and a final report is expected by March, 2015,” Mr Mwinjaka said. The upgrade is expected to in- crease the ports’ cargo handling capacity and improve efficiency.
Nov 17th 2014
Dec 1st 2014