Safaricom Asks Government to Halt Tax Rises on Money Transfers

Safaricom Ltd., the mobile-phone operator 40 percent owned by Vodafone Group Plc (VOD), asked government to stop burdening the poor by increasing taxes on cash transfers including its M-Pesa service.

In February Kenya introduced a 10 percent excise duty on transaction fees on cash transfers. Safaricom’s M-Pesa generates 18 percent of its revenue. M-Pesa, which means mobile money in Swahili, started six years ago as a money transfer service between customers and has since expanded to include the purchase of goods such as airline tickets as well as paying salaries and cash withdrawals.

“Government should be wary of putting any additional tax burden on the customer, and in particular on the poor who rely on M-Pesa,” Chief Executive Officer Bob Collymore told reporters today in the capital Nairobi. “Taxation in the telecommunication sector is amongst the highest in the world with more that 28 shillings ($0.32) of every 100 shillings that the customer spends going to tax.”

The company’s revenue from M-Pesa grew by almost a third to 21.8 billion shillings in the year through March. Safaricom more than doubled the number of M-Pesa agents to 80,000 over the past year and plans to boost revenue from the service to 20 percent of group sales in two years from 18 percent.

“Our intention is that M-Pesa needs to replace cash,” Collymore said today in an interview.

Safaricom’s M-Pesa service in Kenya competes with Airtel Kenya Ltd.’s Airtel Money, YuCash operated by Essar Telecom Kenya Ltd. and Telkom Kenya Ltd.’s Orange Money.

M-Shwari, a mobile banking and loan product introduced in November, now has two million active customers with deposits amounting to 20 billion shillings, he said. Outstanding loans total 60 million shillings while the average size of deposits and loans is 1,000 shillings, Collymore said.

Safaricom shares have gained 59 percent this year, outperforming a 26 percent rise on the FTSE NSE Kenya 25 Index. The stock was little changed at 8.05 shillings by the close of trading in Nairobi.

To contact the reporter on this story: Eric Ombok in Nairobi at eombok@bloomberg.net

To contact the editor responsible for this story: Shaji Mathew at shajimathew@bloomberg.net

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