Following the start of the pandemic, many countries and communities looked at ways to minimise personal contact through social distancing. Transacting with physical cash was seen as a particularly risky activity and some countries around the world have even been withdrawing notes from circulation. 

Consumers too have been switching to online purchases or contactless payments in retailers, rather than using cash. Restrictions on movement also make mobile money transfers more attractive.

For Africa, the move away from cash was already well under way before the pandemic. Countries in East, Southern and West Africa have well-established platforms in operation, which are gaining increased traction among the public.

Andrew Schultz, from Investec’s African equities desk, explains that mobile money systems are popular in Kenya, Uganda and Tanzania, where it is used widely for all sorts of activities from daily shopping to paying bills.  West Africa is a bit behind East Africa, but is catching up, says Schultz. 

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Covid-19 however, may prove to be a catalyst for more widespread adoption of mobile money technology. According to a World Economic Forum report, mobile money providers across Africa have reduced or waived transaction fees and governments are encouraging digital payments to reduce human contact in order to contain the spread of the virus. 

Many operators have also made it cheaper and in some cases easier to sign up, says the report. For example, Ghana's central bank now allows mobile phone subscribers to open a mobile wallet and transfer money daily without needing additional documentation. 

There is therefore an opportunity set for investors, with a number of listed companies active in the mobile money space, says Schultz. 

MTN, through its operations in Nigeria and Ghana; and Vodacom associates, Safaricom (Kenya) and Vodacom Tanzania, are some of the big players in the space, looking to benefit from regulatory support.

Cash shortages in Zimbabwe have helped the adoption of mobile money there, even before Covid-19, while the Nigerian and Ethiopian governments are seeing the value of mobile money in promoting financial inclusion and improved revenue collection. 

M-Pesa, which is one of the leading mobile money platforms on the continent, was established by Safaricom in 2007 in conjunction with Vodafone, and has driven much of the growth in East Africa while showing that it is possible to make a profit by increasing financial inclusion. M-Pesa has supported Safaricom’s average annual revenue growth of about 25% over the last 10 years.

Another firm is Cassava, which is active in Zimbabwe. “Almost all transactions in Zimbabwe done by mobile money, with very little physical currency. There’s a natural inflation hedge in place for the company, with the firm earning a fee on each transaction,” says Schultz.

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Sonatel (Senegal) and Vodacom Tanzania (as noted above) are others to watch, with the latter generating a major portion of its revenue through M-Pesa. 

Many of the continent’s leading banks are involved in mobile money, while some have made the move into other services beyond payments. For example, Kenya’s major banks, including Co-operative Bank, Equity Bank, and Kenya Commercial Bank use mobile money on their lending platforms, an area that was growing going into the pandemic.

“Mobile money is an example of a technology or platform that is likely to enjoy accelerated adoption because of Covid-19,” says Schultz.

“As we have seen, governments are making it easier for people to open accounts, while we could also see the acceleration of the roll-out of other platforms, such as social payments going digital. This would be beneficial for the adoption of mobile payments as well.

“Longer term, governments are likely to see mobile money as a way to broaden their revenue bases, formalise parts of the economy and improve access to financial services,” says Schultz.

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