In spite of Regulatory Constraints, Ecocash Made $4.58bn Revenue in 2020, 75% of Cassava Group’s Total Income

Zimbabwe’s dominant mobile money operator, Ecocash contributed up to 75% of Cassava Smartech’s $56.5 million revenue realised in FY 2020. This is according to Cassava group’s 2020 annual report.

Audited by Big Four accounting firm Deloitte, the latest report revealed that Ecocash generated $42.6 million in revenue during the year, leading to a $16.4 million profit before tax (PBT) for the Cassava group.

Ecocash overcame stringent regulatory constraints introduced by the Reserve Bank of Zimbabwe (RBZ) to drive the group’s earnings.

The Strive Masiyiwa-led company has been subjected to regulatory pressure from the government since mobile money agents were first accused of money laundering activities. This led to a clampdown by authorities on mobile money platforms in the country.

COVID-19 Triggers Subscribers’ Growth

For FY 2020, Ecocash added 1.4 million new subscribers year-on-year, gaining a 15% increase to 10.8 million from the 9.4 million subscribers in 2019. The COVID-19 pandemic spurred the greater adoption of Ecocash’s mobile money service in Zimbabwe. For context, Ecocash’s subscriber base represents 72% of the country’s entire population (15 million).

Last year, Ecocash’s $42.6 million revenue was 206% more than the $13.9 million revenue generated from all other service segments combined.

The pandemic has accelerated the shift towards digital payments due to lockdown restrictions as well as prevention protocols including social distancing and isolation. Just yesterday, the Zimbabwean government extended the months-long national lockdown, having recorded over 35,000 coronavirus cases and 1,400 related deaths.

Consequently, more people have been forced to use mobile money for payments, transfers and airtime/data purchase.

Controlling more than 94% of Zimbabwe’s mobile money market, Ecocash’s subscriber growth compensated for reduced transaction volumes caused by RBZ regulation.

The RBZ had pegged the spending limit on Ecocash at ZW$5,000 per transaction. Furthermore, users could only spend a maximum of ZW$35,000 per week. Added to this, subscribers were restricted to operating just one mobile money wallet.

Suggested read: EcoCash Users in Zimbabwe Decry Ban of Secondary Mobile Money Wallets

Cash Shortage Fuels Mobile Money Usage

Zimbabwe’s Reserve bank has been plagued with cash shortages since 2016 and this has driven up mobile money usage. When people go to banks, they are not assured of getting needed cash or may only be disbursed a fraction of the amount they want.

The RBZ is short on cash and foreign exchange due to hyperinflation and economic instability. Therefore, it comes as no surprise that many people prefer to execute financial transactions via their mobile phones and get cash from mobile money agents.

Just over 2.5 million of 15 million people in Zimbabwe have at least one bank account, with a large majority using only mobile money, especially those living in rural areas.

Although the RBZ began circulating lower-denomination bank notes in 2019, the short-term move failed to end the cash crisis.

The government has sought to control cash flow in the country by ordering all mobile money operators to get connected to its national payments platform, ZimSwitch. ZimSwitch was set up by banks in Zimbabwe and is designated by RBZ as the sole platform for processing cash transactions in the country.

While this means that Ecocash transactions are processed via Zimswitch, users are still patronising agents to obtain hard currency due to proximity and convenience.

Going Forward

With the COVID-19 pandemic still ongoing, Ecocash is poised to continue gaining more subscribers, leading to increased transaction value and higher revenues.

That said, RBZ regulations may yet impact Ecocash’s overall revenue, albeit not quite significantly. Except the RBZ introduces a policy to boost cash reserves, mobile money agents would continue to be the go-to options for cash.

Under the new normal, however, cash transactions in the country are gradually being phased out by mobile money.

Featured Image Credit: Waldo Swiegers/Bloomberg