NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Wednesday, May 21, 2014

Despite investing a lot of money ($1.2 billion) according to the company, Econet says they continue to operate in an ecosystem where they face needless challenges from competition, lacking supporting infrastructure and legislation. The company has always kind complained about these ecosystem issues, but yesterday they got a chance to pour their heart out at a parliamentary committee.

Here’s, according to Econet, what’s making it so much harder to operate:

Government companies blocking their services
The specific issue Econet complained about is something we wrote about a week ago – that ZESA won’t let them sell prepaid electricity tokens via the EcoCash mobile money platform. This actually really doesn’t makes sense as, even though there’s some good money Econet is after with those power transactions, ZESA and the government are really the ultimate losers. ZESA should be making sure more people are able to buy electricity more conveniently, not playing these old market access games. It reminds us of Econet’s own self-serving game blocking the banks from neutral access to their USSD platform.

The mobile money tax burden
Late last year, after realising a lot of transactions were flowing through mobile money platforms – partly thanks to Econet’s own EcoCash numbers PR blitz – the government realised this thing was moving fast enough and needed to make them money too. The result, in Econet’s own words is that now “Econet pays VAT on transaction fees over and above corporate tax and recent Intermediate Money Transfer Tax”. We’re not sure Econet realises how unlikely they are going to be taxed any less in the short term here. Their services are one of the few things moving right now.

The parasites
It’s been clear for a while now that Econet won’t let the other players benefit from the mobile money infrastructure they laboured for on the cheap. If they can help it, and so far they can, they’ll block all parasites looking to be eased into the market with competition help. Telecel have realized this, and before them, the banks and their switch.