Archives for category: Sub-Sahara Africa

           Zimbabwe

Zimbabwe flag

Zimbabwe, formerly Rhodesia, was one of the last countries to gain its independence from colonial rule in 1980. Prior to independence Zimbabwe had a diversified economy, well developed infrastructure, and an advanced financial sector. It is now one of Africa’s poorest countries.

Harare_Zimbabwe_2010-5The current president, Robert Mugabe, has been in power during most of Zimbabwe’s short history. Mugabe’s time as leader of Zimbabwe has been controversial. Mugabe faces claims of human rights violations, corruption, and his economic policies have been questioned. The Mugabe administration redistributed commercial farms owned by non-black-African farmers to native Zimbabweans and many in the international community have also claimed he is racist to minority whites because of his “Indigenization” policies, which gave Black Zimbabweans the right to take over and control many foreign and white owned businesses.

Welcome to Zimbabwe

Mugabe recently gained a new term as president during heated elections in 2013. Leaders of the opposition party, the MDC, claimed that Mugabe and his party, the Zanu-PF, fraudulently stole the election even though results showed a landslide victory for the 91 year old Mugabe.

Business Environment

Zimbabwe has a population of over 13 million and English is the official language with multiple dialects being spoken throughout the country. Zimbabwe, like much of Africa, has a large youth population with 62% of the country under the age of 24.

Youth in ZimbabweZimbabwe remains one of the world’s least free economies. The labor market is one of the most restricted in the world, and business licensing forces most workers to seek employment in the informal sector. The violent seizure of land through the indigenization policy has underscored poor government land reform policies and upset investor confidence in a once-vibrant agricultural sector. Prior to the land reform Zimbabwe was a major tobacco producer and a bread basket for surrounding countries.

 Zimbabwe’s economy had a decade of contraction from 1998-2008 followed by hyperinflation in 2009. The country  was ravaged by hyperinflation, which officially reached 500 trillion per cent in 2008. The economy started to stabilize between years 2009-2012 but appears to be backsliding at this time.

Zimbabwe does not have its own currency and uses eight others as legal tender, with the US dollar and South African rand most commonly used. By 2009 the worthless Zimbabwe dollar was replaced by a multi-currency system based largely on the American dollar. The switch to the American dollar brought stability, but at a cost. As the dollar rises in value against other currencies in the region, such as South Africa’s rand, it makes Zimbabwean business less competitive.

Zimbabwe has a huge informal economy with unemployment as high as 95%. 80% of the population lives below the poverty line. Zimbabwe has its share of problems from political violence, human rights violations, land reforms, and an economic collapse but it also has hope and opportunity. Zimbabwe has one of Africa’s highest literacy rates at over 90%. The population is usually better educated than the African average, making the people one of the greatest assets of the country. It also has a growing telecommunications and mobile money industry.

Zimbabwe mobile market look

Zimbabwe has a mobile penetration rate of 104%. There are currently 13.5 million subscribers and the largest telecommunications company is Econet, with 9 million subscribers. There are over 5 million mobile data subscribers with 98% of those subscribers accessing the internet via their mobile device. The current internet penetration rate in Zimbabwe is 64%.

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Zimbabweans have very little confidence in their formal banking sector. A record number of banks have failed in the last decade. Apart from that, many account holders lost fortunes to the banking sector when the Zimbabwean economy crashed in 2009. Not a single penny of the Zimbabwean dollar value held by the banks was paid to account holders when the country changed over to the US dollar. The adoption of the US dollar has brought about its own headaches to the Zimbabwean economy. Major problems include illiquidity and the lack of small denominations. Getting change when transacting is therefore a problem. This kind of environment has favored the widespread use of mobile money –which is cashless.

Zimbabwe is one of nine countries in the world where more people use mobile money than have bank accounts. According to a study conducted by FBC Securities in October 2014, only 14% of Zimbabwe’s 13 million population have bank accounts (approximately 1.8 million Zimbabweans). The country’s three mobile network service providers (Econet, Telecel and Netone) dominate the mobile money sector. Econet through its EcoCash brand is by far the biggest mobile money service brand in Zimbabwe. EcoCash pioneered the service in the country and enjoys all the first mover advantages. It has made a significantly higher investment into brand and platform awareness than any other player allowing EcoCash to become a household name. Econet Wireless has 3 million registered users for its mobile money product and now accounts for about 20% of payments and purchases in Zimbabwe.

EcoCash, offering domestic P2P money transfer services, is just the first step towards a much bigger goal: becoming the dominant payment system in Zimbabwe for the banked and unbanked alike. EcoCash is currently targeting two pain points with major commercial opportunity: enabling retail payments to merchants and creating a bridge between the informal and formal sectors. To capitalize on these opportunities, EcoCash is building two important structures: a merchant acceptance network and full interoperability with Zimbabwe’s banks. EcoCash sees interoperability with banks as the key to linking Zimbabwe’s formal and informal economies. There is substantial demand for payment services between these sectors, with money flowing between banked and unbanked families, and between unbanked individuals and the formal sector in the form of retail payments, school fees, and utility bills.

The key regulators in Zimbabwe include The Reserve Bank of Zimbabwe for the financial sector and Postal and Telecommunication Regulatory Authority of Zimbabwe (POTRAZ) a telecommunication regulator for the communications sector. Regulation has lagged behind the technological innovations happening in the telecom/mobile money sector. Initially, the Post and Telecommunications board had oversight over the activities of the mobile network service providers but with the emergence of the mobile money –the central bank has also become involved. The responsibilities of the two regulatory authorities overlap and of late they have been fighting for turf at the expense of developing the mobile money sector.

City of HarareIn the last decade Zimbabwe has seen the worst and is hoping the future will be better. Things are still on the brink, as the current backsliding of the economy has shown, and many are confident things will change once Mugabe is no longer in power, which may happen soon considering his advanced age. There can be no question that certain policies, such as the land reform policy, have hurt the Zimbabwean economy and its people. The growth of the telecommunications and mobile money sector gives the country hope that it is turning a corner and that the future will truly be better than the recent past!

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Mobile Market Look: Tanzania

Tanzania

According to the Alliance for Financial Inclusion, mobile money accounts now outnumber bank accounts in nine African countries. Among them is the east African country of Tanzania – the next destination for MMIT’s Mobile Market Look series.


Tanzania is the second largest economy in east Africa and ranked the 6th most populous country in Africa, with just below 50 million people (2013). Although it remains one of the poorest countries in the world, the nation has a bright future with promising untapped potential. Mainly known for its gold exporting and tourism sector with Mount Kilimanjaro, the Serengeti, and the beaches of Zanzibar, the country has so much more to offer beneath the surface.

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Tanzania is growing at a faster rate then most of Sub-Sahara Africa. From 2001 to 2014 Sub-Sahara Africa has recorded annual GDP growth rates between 4% and 5%, while Tanzania has seen rates between 6% and 7%. Tanzania’s projected rates until 2017 are predicted to be 7% or higher annually. Over the years, Tanzania has transpired as a popular destination for Foreign Direct Investment (FDI) initiatives due to the political stability, location, and favorable investment regulations. The country has also been a major beneficiary of the Bill and Melina Gates foundation and continues to improve in areas of human development. Emerging industries that are increasingly gaining attention and more investment within the nation include agriculture, natural resources, transport, financial services, telecommunications, and our focus – mobile payments.

Mobile Money in Tanzania

MOBILE_PHONE-IMAGE-e1378131623527Although Kenya is the undisputed trendsetter when it comes to mobile money, Tanzania has been one of the fastest and most successful markets to adopt mobile payments systems. The first mobile payment product in Tanzania was the Kenyan mobile money transfer service M-Pesa, launched by Vodacom in 2008 just one year after its debut in Kenya.

As of last year, Tanzania surpassed Kenya in terms of transaction volumes to become the leading country for mobile payments. Tanzania has exceeded Kenya in terms of mobile money usage in 2013. According to a report by the GSMA, 44% of Tanzanian adults used some form of mobile money compared to 38% in Kenya.

The total value of transactions in 2013 was $17.7 billion (USD), which accounted for over half of Tanzania’s GDP at 54%. The number of mobile phone subscribers also continues to grow at an unprecedented rate. Mobile phone penetration was approaching 70% at the end of 2014 with an annual subscriber growth rate of over 20%. In 2014, about 55% of Tanzania’s mobile subscribers use mobile money services, with over 16 million registered mobile money users. According to the GSMA, over 11 million of these accounts are active within a 90-day period and providers are processing more than 99 million transactions per month valued at over 3 trillion TZS ($1.8 billion USD).

Tanzania mHealth 500Mobile money products within Tanzania are quickly evolving serving the population with new innovative ways to carry out transactions, some never before seen in any other market of the world. Transactions are moving beyond the traditional airtime top-ups and money transfer options offered by the likes of M-Pesa to offer more mobile money payment capabilities. Tanzanian consumers now have a plethora of mobile money payment options for salaries, bills, utilities, fuel, insurance, bus passes, micro-financing, healthcare, physical goods, and beyond.

One of the newest innovations is an interest-earning mobile money product. Customers receive quarterly interest for storing money on their mobiles, a similar concept to gaining interest in a bank account. Tanzania seems to be quickly emerging as a target market for companies to pilot new mobile innovations due to the success of mobile money and favorable market conditions. Examples of new mobile innovations targeting Tanzania outside of mobile money initiatives include Facebook’s internet.org, Tigo’s music streaming service, or Ex-Apple CEO, John Sculley’s Obi Mobile smart phone brand.

Why has Tanzania been so successful?

Nearly 6 years ago, Tanzania had one of the highest population percentages of financially excluded citizens. Lack of trust, understanding, and access to formal banking systems are just some of the reasons people are unbanked. Mobile phone ownership rates have grown rapidly in the country and the majority of the population have access to a mobile phone, creating a favorable environment for mobile payments. According to the InterMedia FITS (Financial Inclusion Tracker Survey) study in 2012, even among underprivileged households of rural, unbanked, and poor (living on less than $2 a day) – 50% of these families had access to a mobile phone and owned a SIM card.

The Central Bank of Tanzania (BoT) is openly supportive of mobile money usage and is actively engaging in related initiatives in moving Tanzania towards becoming a cashless society. The use of financial services has doubled in the past 5 years due to the mobile surge. The BoT’s goal was to increase the share of the population with access to financial services from 27% in 2009 to 50% in 2015. This goal was not only achieved but was also exceeded in 2013 at 54% – achieved 2 years earlier than planned. Tanzania has been recognized as one of the leading countries of Africa for demonstrating a favorable environment and policy for promoting financial inclusion.

The mobile money industry is regulated under structures that differ from typical financial services providers. Major players within the industry work together – the Tanzanian government, mobile network operators (MNOs), and financial services – in collaboration to develop a sustainable mobile money framework. Industry consolidation of MNOs occurred in 2011 into 2012 due to price wars and to prevent market saturation.

Tanzania’s mobile money ecosystem is ripe for interoperability and could be one of the first countries to fully capitalize on the benefits. The four largest MNOs – Airtel, Vodacom, Tigo, and Zantel, have established partnerships with the BoT and the two largest banks – CRDB Bank and National Microfinance Bank. The purpose of these partnerships is to craft regulations for the industry and as a first step in the direction of interoperability.        

What is the future of Mobile Money in Tanzania?

The absence of interoperability remains a major impediment within the mobile payment industry. Interoperability is the ability for different information technology systems and services to communicate and exchange data. Without it, consumers suffer from lack of flexibility and accessibility to a wider array of services. Customers may receive mobile money from a different service than what they currently have, which may force them to travel a considerable distance to set up a new mobile money account, wait in line, cash-out, and then have multiple mobile money options on their phones.

rural tanzania

It is estimated that 75% of Tanzanians live in rural areas, which presents a challenge for any agent network system within the country. Based on a FITS user survey many consumers have experienced issues with the current mobile money provider agents, mainly issues of inconsistency, insufficient e-float, absenteeism, or insufficient help with transactions. The easier the payment structure, the more likely they are to use it again or continue to use on a frequent basis; this will ultimately result in an increase in overall transaction volumes.

However, as commonly seen throughout Sub-Sahara Africa, many industry players refuse to open up doors to competitors – even if it could be to their benefit. Additionally, several country governments within Africa exercise forms of protectionism placing restraints on players within the mobile payments industry and their roles within the ecosystem.

The next initiative for the BoT is to find a way to link all of these mobile money users with formal banking institutions to drive up the percentage of the financially included. Tanzanians no longer need to invest their money in livestock or jewelry, but can store value on their phones and now start earning interest. Services within the market are still highly competitive and are constantly looking to introduce new mobile money options to grab a higher market share. Such innovations are benefiting consumers and changing life as they know it.

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