The Lesson We Remembered When M-Pesa Failed In South Africa

Vodacom is South Africa’s biggest phone operator and in 2010 when the country hosted the football World Cup, they launched M-Pesa.

M-Pesa is a mobile money transfer system and Vodacom recently announced that it will soon be scrapping it. So six years after its launch, M-Pesa failed in the South African market, why?

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M-Pesa failed in South Africa but it has been a huge success in other African countries where it is still operative. It has operated successfully in the DR Congo, Egypt, Ghana, Kenya, Lesotho, Mozambique and Tanzania, with Kenya being its most successful market since it was launched there in 2007.

Considering M-Pesa basically allows people who have no bank accounts to transfer money quickly, easily and safely using their mobile phones, it can be viewed as an attractive service.

M-Pesa Failed

The success of the service in other African countries would have factored largely in Vodacom’s plan, and when you add to that the fact that mobile phone usage in South Africa is high with about nine in 10 South Africans owning a mobile phone (according to figures from the Pew Research Center) and also consider that Vodacom is the largest network provider, you get what must have looked to Vodacom like a rock-solid business plan.

With a target customer base of 10 million people actively using M-Pesa in three years, Vodacom fell way short, succeeding only in netting 76,000 active users in M-Pesa’s six years, a poor show by any regard.

So what is the difference between South Africa and the other countries where M-Pesa is thriving? It’s actually really good news; South Africa has the most technologically advanced, financially liquid and accessible banking system on the continent. It is an untested but widely touted view that in South Africa, there is a bank, branch or ATM within a 20km (12-mile) radius in any urban or rural settlement.

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The fact that M-Pesa failed makes a solid case for studying markets and trends when investing. Even when you have a good product, the biggest question should still remain; how many people need this? Vodacom has however not given up hope on the financial services environment in SA and rightfully so as numerous opportunities still exist.