In Africa, for several years now, the telephone has not only been used to make calls or access the Internet, but also to transfer money: a revolutionary idea that was first introduced in Kenya in 2007 by the operator Safaricom thanks to “M-Pesa”.
This has consequently been of great interest to telecommunications companies who now wish to integrate one of the most profitable financial services markets in Africa: it is the case in Cameroon. This method of money transfer, although advantageous, nevertheless presents inconsistencies that seems to be ignored by public authorities.
The “cell phone & money transfer” duo: the ideal model for African populations.
Nowadays competition in the money transfer market, which was worth 31.4 billion euros in 2015, is now being played out on cell phones. According to the World Bank, Africa nearly has 650 million cell phone users, more than the United States and Europe. To say that, it is a promising market that the large Western multinationals are fighting for. In Cameroon, it is the South African multinational MTN in 2009, which was the first to have the ambition to capture these two important markets by creating its “MTN Mobile Money” service in partnership with the Cameroonian bank Afriland First Bank. But it is its direct competitor Orange, a subsidiary of the large French group, which launched its project one year later in partnership with BICEC, which is now the leader in mobile money transfer with nearly 12 billion CFA francs of transaction volume per year thanks to “Orange Money“, a service which is very popular with young people. However, the first company to propose the mobile money transfer is the local Cameroonian company Express Union, specialized in money transfer and micro finance; which in 2010, had achieved a turnover of nearly 3 billion CFA francs. It is unquestionably a system that is perfectly suited to African populations who, at affordable prices, can both quickly send money to the most remote areas, as well as receive money from their relatives nationally and even internationally.
On the way to the banking system in African societies?
The telephone has become a means of payment. It is now possible with an “Orange Money” or “MTN Mobile Money” account to make online purchases, pay your energy bill or pay your school fees. We are now witnessing what could be likened to the banking of African populations, thanks to the financial services offered from cell phones. It should be remembered that in Africa, less than a quarter of the population has access to a banking service, but many Africans have a telephone or even two.
Although COBAC’s main banking criterion is the number of bank accounts, this new financial transaction tool is increasingly familiarizing Africans, especially young people, with banking habits (materialization of money, online shopping, etc.). It is also possible to make transfers from one’s mobile money account to one’s bank account and vice versa.
Latest innovations to date, Orange now offers customers of its African subsidiaries Visa cards and an “OM NFC sticker” to ease shopping in shopping malls; and MTN, through its partnership with the British firm Worldremit signed in October 2016, plans to offer its users the opportunity to send and receive money internationally. This is quite curious when we remember that these are still only telecommunications companies.
Persistent legal uncertainty.
In Cameroon, there is every reason to believe that telecommunications companies are looking for new sources of revenue since they have been compelled to charge prices that are more advantageous to their users under the weight of competition. Indeed, the market leaders, MTN and Orange, the only competitors at the time of the country’s accession to telecommunications services after the withdrawal of the operator Mobilis, have long practiced prices close to fraud and have managed to replenish their treasuries. Now that they have returned to more reasonable methods, they are turning to mobile transfer and payment services to try to maintain their resources at the same level. The only problem: a legal uncertainty persists on this activity, which is becoming more and more important. Indeed, even companies can no longer do without mobile money, which is an innovative way to get paid. Eneo, Canal+, Activa, Brussels Airlines, Kenya Airways, etc. All of them have signed agreements with MTN or Orange to facilitate the payment of their customers. The government has not done the contrary as it has relied on this means of payment to collect taxes since December 2014, by introducing the “Mobile Tax”. However, the tax authorities have not yet specified the conditions for taxing Mobile Money activities, even though it is mentioned for the first time in the 2014 finance law. This leaves a legal void that could be abused by telecommunications companies.
In May 2015, the Secretary General of the Banking Commission of Central Africa (COBAC) had deplored the non-compliance with Regulation 02/00/CEMAC/UMAC on the harmonization of regulations in CEMAC member states in the report of his extensive assessment mission to capital transfer institutions. It is therefore conceivable that this control also concerned telecommunication companies operating in this sector thanks to the authorization of the Bank of Central African States (BEAC). Especially when we know that in 2016, these companies were qualified as “bad payers” by the National Commission for the Fight against Corruption (CONAC), which claimed 176 billion FCFA of unpaid taxes and fees. Even more reason to review the regulations applicable to Mobile Money, at the risk of bearing the undesirable effects due to the vagueness and legal anarchy that characterizes it.
Consequences: Unfair competition and increasing level of unemployment.
Thus, we are witnessing an overwhelming competition between these telecommunication companies and money transfer companies, but also with local micro-finances, which are under the weight of the banking regulations imposed by COBAC, while their competitors do not seem very worried about it. These subsidiaries of large multinationals, which already have the advantage of having at their disposal large funds for their investments, do not bear the same burdens as their competitors. They have freely opted for partnerships with service stations, stores, boutiques, etc. In exchange for a commission, they have at their disposal a staff already employed, a room and thus avoid the costs of personnel, rent, maintenance, security, etc.. As a result, they charge better prices. Naturally, the counters of money transfer companies are not so saturated since the advent of “Mobile Money”, a more appropriate service, less expensive and above all available 24 hours a day, 7 days a week. To transfer an amount of 10 000 FCFA for example, Express Union or Express Exchange receives a commission that varies between 400 FCFA and 450 FCFA. For the same amount, however, Orange Money charges a cost between 100 FCFA and 150 FCFA. The choice is therefore quickly made for consumers always out for good deals. However, this is to the great disadvantage of job creation. This is why in their policy of preservation of national heritage; Western countries have made money transfer the exclusive prerogative of the post office because it helps preserve several tens of thousands of jobs. We would have expected such a reform of our authorities, whose inaction could lead to massive layoffs of money transfer companies or micro-finance companies in order to survive the competition.
How to reverse the trend?
To remedy this situation that weighs heavily on our economy, public authorities would benefit from greater regulation of both money transfer and mobile payment activities. As far as money transfer activity is concerned, it certainly cannot be under a state monopoly because of the jobs it has created thanks to private companies; but it could be strictly reserved for companies that are dedicated to financial and banking services in order to boost jobs and regularly collect the related taxes. In this scheme, the telecommunications companies will have to create companies specialized in banking and financial services on the sidelines of their main activities, and operate under fair conditions with their competitors. Failing this, the tax authorities, which can no longer do without this means of payment, will have to work to properly determine the income related to the financial activities of these companies and tax them according to a tax system created for this purpose. The government should also require, as a condition for the continuation of their activities, that these telecommunications companies create direct employment (there is no question of relying on “call-boxers” and other partners !!!).
Nevertheless, this situation raises a question of economic sovereignty of African countries which are influenced by the large Western multi-nationals, who now have control not only over the communications of their populations but also over their finances. This is enough to reinforce the lobbying of these mastodons on the government.
Arielle BEKIMA.
Sources : JeuneAfrique, LeMonde, Baobab hebdomadaire of January 9th, 2017, Camer.be