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Africa Tech Trends: Possible remittance merger might help online firms

Africa Tech Trends is a fortnightly column by Tom Jackson focusing on the most important developments in Africa’s technology industry, and examining how technology is disrupting the way business is being done on the continent.

Even if Western Union and MoneyGram were to merge, it is not necessarily bad news for online remittance firms

Remittances in Africa is big business. Africans in the diaspora send home almost US$40bn each year. Many companies – both international and African – are seeing the benefits of entering this sector, from online remittance operators such as eTranzact and WorldRemit, to mobile money services, to Bitcoin remittance start-ups such as Beam and BitPesa.

Aside from these online firms, remittances have for years remained a virtual duopoly between Western Union and MoneyGram. However, recent reports from Bloomberg that Western Union is in “early stage” talks to acquire its major competitor, though denied, have caused concerns. Former UN Secretary General Kofi Annan has called the current situation a remittance “super racket”, meaning the cost of remittances remains high. Between them, the two companies control 50% or more of the remittance market in most sub-Saharan African countries.

WorldRemit has called on regulators to unconditionally block any acquisition of MoneyGram by Western Union, saying approval would create a monopoly impacting the lives of millions of people around the world and eliminate the small amount of competition that currently exists. But why fight it? Online services such as WorldRemit are already gradually drawing away customers by offering greater convenience and lower prices. A merged Western Union-MoneyGram charging even higher prices would only speed up this already evident process.

Kenya’s Safaricom an unstoppable behemoth

Speaking of competition, are we likely to see any of it anytime soon in the Kenyan telecoms sector? Not likely. Safaricom’s full year financial results were extremely strong, with data revenue growing by 59%, and active monthly mobile data customers rising to 11.6 million. Total company revenue rose 13%, and profit after tax increased 38%. M-Pesa revenue grew 23%. Its major competitor – Airtel – languishes far behind, while yuMobile has got out and Orange is getting out.

Safaricom is not resting on its laurels, however. In the same announcement, it said it will be expanding its long term evolution (LTE) service from Nairobi and Mombasa to 13 other towns by December, while a new television service – The Box – will bring 3G and 4G networks into people’s homes. Its acquisition of much-needed spectrum as part of its security contract with the government will only boost its abilities further.

Can anyone challenge the firm? Maybe one company can. Rumours abound amongst those in the know that a Vietnamese telecoms operator – already active in some African countries – is plotting an entry into Kenya. Now that would be a battle worth watching. 

A year of political failure in South African ICT

Almost exactly a year ago, South Africa’s President Jacob Zuma appointed Siyabonga Cwele to head up the Department of Telecommunications and Postal Services. The move was surprising as Cwele’s predecessor Yunus Carrim was widely praised for steadying the ship at the ministry following the acrimonious tenure of the controversial Dina Pule.

But Cwele has helped to steer that ship into more turbulent waters once again. His commitments on digital migration have not been kept, with the process now handed over to a different department. The same happened with his cybersecurity hub. All has gone quiet on the rollout of broadband to clinics, schools and police stations, while his deadline on the finalisation of the ICT policy review has been missed.

Meanwhile, South Africa has fallen down international rankings in terms of competitiveness in ICT, slipping five places to 75th. This is third in Africa, behind Mauritius and Seychelles. And its international prestige in ICT took a further dent last October when it was kicked off the International Telecommunication Union (ITU) council for the first time since 2006, in spite of 13 other African countries gaining election.

Both locally and internationally, South African ICT is in the doldrums politically. It may be time to put Cwele out to pasture and seek a change of direction.

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