Why M-Pesa failed in South Africa

South Africa’s largest mobile phone operator Vodacom has announced it will be scrapping its M-Pesa mobile money transfer system in Africa’s second-biggest economy.

For many pundits the move comes as a surprise, because M-Pesa has been a huge success in other African states – especially in Kenya where it was launched in 2007.

The service allows people without bank accounts to transfer money quickly, easily and safely using their mobile phones.

According to a World Bank report, only 12% of Africans with bank accounts use mobile money services.

However, this is not the case in South Africa.

Mobile phone usage is high – nine in 10 South Africans own a mobile phone – and a third of these are smartphones, according to figures from the Pew Research Center.

Yet South Africa has the most technologically advanced, financially liquid and accessible banking system on the continent.

About 75% of adults in the country have bank accounts, a survey done by technology research body FinMark shows.

In a statement, Vodacom Chief Executive Shameel Joosub said the success of M-Pesa in South Africa hinged on “achieving a critical mass of users”.

But Vodacom has struggled to find the customers. That is the problem.

Wrong partner?

M-Pesa was launched in South Africa in 2010, perhaps with the hope of capturing the energy and excitement of a nation hosting the football World Cup.

Trading on its position as the leading mobile operator in the country, Vodacom thought it could build an M-Pesa customer base of 10 million in three years.

However, six years on the service only has 76,000 active users in South Africa, although many more have been registered.