A TechCabal roundup about the
impact of the coronavirus pandemic
on Africa’s tech industry

JULY 5, 2020
This newsletter is a weekly special focused on the effect of the novel coronavirus, COVID-19 on African tech and innovation ecosystems. Subscribe here to get it directly in your inbox every Sunday at 3 pm WAT.


If you’ve been paying attention, you probably already know that mobile money is one of the major sectors that has seen greater adoption owing to coronavirus lockdowns.

There were a few struggles but overall, initial measures to accelerate its adoption appear to be paying off.

But while certain countries are making what appears to be the right decisions, we aren’t so certain about others, especially one in particular.

Welcome! This is the 15th edition of our weekly special focused on the effect of the novel coronavirus, COVID-19 on African tech and innovation ecosystems. You may catch up on previous editions here.

We sincerely hope you and yours are safe. The virus is still out there so please continue to observe all health guidelines and safety precautions. Learn about those guidelines here.

Let’s take a look at how countries are treating mobile money in the middle of a multi-dimensional crisis.


The fear of cash

To prevent the spread of COVID-19, African governments
worked with providers to waive mobile money transaction fees. By the end of March, Kenya and Ghana were some of the countries that had made the move.

There were also telco-led efforts; for example, MTN implemented fee reduction across a number of its markets including Uganda, Rwanda, Zambia and Cameroon.

The consensus is that digital payment is a valuable tool for preventing the transmission of the virus. It allows people to maintain social distancing while avoiding, to a great degree, the use of cash, which could serve as a vector for the spread of the virus.

A tale of two countries

In Kenya, Safaricom waived fees for 3 months
following a directive from the President and a meeting with the country’s central bank. President Uhuru Kenyatta asked that they

“… explore ways of deepening mobile-money usage to reduce the risk of spreading the virus through physical handling of cash.”

And the waiver by Safaricom was a sacrifice worth $51.64 million.

The telco announced that it expected to forgo 7.3% of MPesa’s annual revenue as a result of fee waivers. One could argue that it might have gained new users as a result of the waiver or seen an increase in transactions.

On the other hand, an impending economic crisis affecting their income might have forced some users to avoid paying fees while seeking other means to conduct financial transactions. Perhaps many people would have hoarded cash as research focused on some advanced economies is now showing. This essentially justifies the sacrifice made by Safaricom. But there’s a bigger case for aligning with policies that support the adoption of mobile money.

Mobile money is more than a tool for curbing the spread of a virus. In some countries, it is the only means of payment for many people. Consequently, and most importantly, it has been a good tool for financial inclusion.

It has been 3 months since Safaricom made the announcement. Its mobile money service is the market leader in Kenya and now the central bank in a press release says the waiver was beneficial.

“A significant increase in the use of mobile money channels by individuals in both value and number of transactions was noted,” the Central Bank of Kenya said.

Its press release further noted that 1.6 million additional customers began using mobile money although there was a marginal decline in business-related transactions.

The bank noted that most of the increase was in low-value transactions of $9 or less. Low-value transactions, it highlighted, account for 80% of mobile money transactions. It announced a 3-month extension of the waivers. It is unclear to what extent the waivers have helped cement Safaricom’s dominance. News reports this week say MPesa has a 98.8% market share as of March 2020.

In Southern Africa, there’s a different story in Zimbabwe. The government has basically banned mobile money platforms!

It also banned trading on the stock exchange stating that it
“is in possession of impeccable intelligence” that shows “mobile money systems of Zimbabwe are conspiring, with the help of the Zimbabwe Stock Exchange, either deliberately or inadvertently, in illicit activities that are sabotaging the economy.”

The government’s aim is to stop the decline of its currency’s value. The country has a number of monetary challenges including growing inflation and a paralyzing shortage of foreign exchange.

Note: Prof. Hanke’s calculations and the data in his chart above were based on information from Bloomberg, US Labour Statistics, Zimbabwe National Statistics and Zimbollar. Hanke notes that the rates are implied from RTGS dollars and PPP; values below 25% should be considered unreliable.

There’s a parallel market and a street rate for foreign exchange as
residents have lost trust in the currency. Forex traders have taken advantage of this. The government argues that it has resulted in multiple exchange rates for Zimdollar cash, Zimdollar mobile money, Zimdollar bank electronic funds and for the US Dollar. It’s important to note that it just banned the domestic use of the US dollars last year replacing it with the Zimdollar.

Millions of Zimbabweans rely on mobile money because it is difficult to obtain physical cash. According to the central bank, mobile wallets accounted for 84.8% of all transaction volumes and 22.6% of value in the last quarter of 2019. Mobile money is a lifeline amidst a prolonged liquidity crisis.

So it begs the question, why will the government (or its security forces) ban mobile money? While it might make political sense, I struggle to see the
economic benefits. This is asides the negative impact on financial inclusion.

With a lockdown in place, the ban makes the lives of ordinary citizens who rely on mobile money for payments and remittances harder. In response, Zimbabweans have taken to twitter and other social media platforms to express their frustration.

Ecocash, the country’s leading mobile money platform has defied the directive. It urged its users to continue to conduct their “lawful” transactions saying that only the country’s central bank could ban its operations.

While it seems like punishing the bad guys, the mobile
money ban could erase the progress made with financial inclusion. The country has the highest level of mobile money penetration on the continent according to the GSMA.

2014, 3.25 million Zimbabweans held mobile money accounts and penetration had reached 95.4% as of January 2016. Transaction value
grew from $5.8 billion in 2016 to $18 billion in 2017. That’s about half of what Kenya, which is a more matured market, did in the same year.

The ban also damages the work of private enterprises leading the company’s innovation and technology ecosystem as
well as creating value for the economy.

In December 2018, Econet Wireless demerged and listed (PDF) Cassava Smartech (which includes its EcoCash mobile money operation) separately on the Zimbabwe Stock Exchange (ZSE) which was valued at around $3.9 billion soon after listing.

Now EcoCash is fighting a government ban. Even when the ban eventually gets lifted, the sector will most likely lose some steam.

Without mincing words, Zimbabwe needs to revert its current ban and put together a solution that actually solves its foreign exchange problem instead of destroying such a crucial sector.
This is
not the way to treat mobile money during an economic and health crisis!


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Best wishes for a great week

Stay safe and please observe all guidelines provided by health experts.

You can subscribe to our TC Daily Newsletter; the most comprehensive roundup of technology news on the continent, and have it delivered to your inbox every weekday at 7 am WAT.

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– Victor Ekwealor, Managing Editor, TechCabal

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