Safaricom protests over Sh19bn free M-Pesa loss

Safaricom  has criticised the Central Bank of Kenya (CBK) for extending the period for free M-Pesa transactions without consulting it, saying it will lose Sh19 billion worth of revenue by the end of the year from the fee waivers.

The telecoms operator’s outgoing chairman, Nicholas Ng’ang’a, Thursday told shareholders at the company’s virtual annual general meeting that the company has suffered from unilateral decisions made by regulators.

Mr Ng’ang’a did not mention the specific regulators, but the context of his speech points to the CBK, which oversees the firm’s mobile money service and has been spearheading financial relief for Kenyans in this period of Covid-19 pandemic.

The CBK announced the removal of charges on M-Pesa transactions of up to Sh1,000 from March 16 until June 30, a period when bank-to-M-Pesa transactions would also be free.

The regulator later made a unilateral decision to extend the relief measures until December 31, drawing protests from Safaricom and banks.

“We estimate the impact on M-Pesa payment support will increase to about Sh19 billion by the end of the year. Our appeal to the government would be that the regulatory environment that will follow this period of the pandemic be designed to support the revival of businesses and a return to growth,” Mr Ng’ang’a said.

“We are keen to see our regulators and all concerned stakeholders adopt a more consultative approach to concerns within the industry in order to arrive at a more considered outcome for the benefit of all.”

At Sh19 billion, the estimated revenue loss is equivalent to 22.5 percent of the Sh84.4 billion Safaricom made from the M-Pesa platform in the year ended March 31, 2020.

It also represents 7.2 percent of the company’s total revenues of Sh262.5 billion in the same period. It is not yet clear what impact the free M-Pesa transactions will have on the telecoms operator’s bottom-line in the current financial year ending March 2021.

If the relief measures are allowed to expire on December 31, 2020, they will have been in place for about nine months or 75 percent of the firm’s current financial year.

Mr Ng’ang’a, who will be replaced as chairman by Michael Joseph effective Saturday, said the fee waivers were offered in good faith to help stop the spread of the coronavirus by reducing handling of cash besides easing financial burden on customers.

“We have made significant decisions as a company in recent months to support customers and ensure Kenyans can spend their money where they need it most,” he said.

“We have partnered with the government to offer solutions to manage this pandemic and the total value of our contribution to the fight against this pandemic currently stands at Sh6.5 billion and this cost continues to grow every day.”

Soon after the CBK announced the extension of the relief measures to the end of the year, Safaricom lobbied the regulator to make changes that would limit the revenue loss.

This came after the firm noticed that customers were splitting high-value M-Pesa transfers into multiple transactions to avoid paying any fees.

“What has happened a lot in those transactions below Sh1,000 is that people are starting to split transactions. If they want to send Sh60,000 they split it into 60 transactions. And believe it or not, people actually do that,” Mr Joseph said in a recent conference call with investors in his previous role as Safaricom’s acting chief executive.

Safaricom lobbied the regulator to limit the number of free M-Pesa transactions to five per day to stop businesses and high-net-worth individuals from taking advantage of the measures aimed at offering relief to ordinary folk.

A person sending Sh100,000 at once to another registered M-Pesa user, for instance, pays a fee of Sh105. By splitting the transactions many times, however, one can avoid paying any charges.

Safaricom also asked the CBK to lower the threshold for free M-Pesa transactions to Sh500. The regulator, however, ignored the requests.

“All I can say is that the CBK reviewed the emergency measures that were put in place and came out with the determination that we said. We are not in the business of having public discourses about some of these things,” Central Bank of Kenya Governor Patrick Njoroge said recently.