As you know, EcoCash was brought back under Econet a few months ago. This means the Econet Group now comprises the following segments:
- Mobile Network Operations: Mobile telecommunications and related overlay services (Econet).
- Mobile Money: Mobile money transfer and payment services (EcoCash).
- Insurance: Funeral and life insurance, along with short-term insurance services.
If I told you one of these three posted losses in the half-year ending August 2024, you might assume it was Insurance. You’d be wrong. The Insurance segment posted profits of ZWL 42 million (approximately USD $1.7m–$3m).
The major business remains Mobile Network Operations, which recorded profits of ZWL 894 million (approximately USD $36m–$64m).
However, the Mobile Money business posted losses of ZWL 38 million (approximately USD $1.5m–$3m).
The confusion
These figures are from Econet’s half-year results. However, EcoCash Holdings also released its half-year results, reporting a profit of ZWL 1.5 billion. So, which is it—a ZWL 38 million loss or a ZWL 1.5 billion profit?
This discrepancy stems from a restructuring. Econet acquired financial technology businesses from EcoCash Holdings Zimbabwe Limited earlier this year.
EcoCash Holdings no longer operates mobile money services. Effective March 1, 2024, it transferred non-banking assets, including EcoCash (Private) Limited, to Econet Wireless Zimbabwe Limited.
EcoCash Holdings is now essentially Steward Bank, as that’s its only subsidiary. If you want the results for the mobile money business, you need to refer to Econet’s financial statements.
Breaking It Down
- EcoCash (Mobile Money Business): Posted a ZWL 38 million loss.
- Steward Bank (under EcoCash Holdings): Posted a ZWL 1.5 billion profit.
The naming convention is confusing. EcoCash Holdings retained its name even after losing its mobile money subsidiary, EcoCash. It no longer has anything to do with mobile money, yet the name persists. Perhaps the Zimbabwe Stock Exchange should look at this.
EcoCash (mobile money)
EWZL reported a 26% growth in revenue for the mobile money business in the half-year. This growth was driven by:
- Increased cash-in transactions.
- Payroll processing into wallets.
- International remittance receipts.
The company is onboarding more payment partners, despite already having the largest network of such partners in the industry.
Econet claims that reintegrating the fintech business into its Mobile Network Operations enhanced customer experience, expanded its ecosystem, and drove growth. While this may be true, it’s unclear to what extent reintegration contributed to growth. Econet would naturally have an incentive to highlight its benefits.
Despite the revenue growth, the mobile money business still posted a loss of ZWL 38 million.
Why the losses?
While the abridged financial statements don’t specify the reasons, several factors could be at play:
- Network Infrastructure Modernization: Econet invested heavily in infrastructure, including deploying 5G base stations. While this benefits the entire business, some costs may have been allocated to the mobile money segment. I’m not sure that’s how it works but it’s something to consider.
- Onboarding Payment Partners: Expanding the payment partner network involves setup fees, integration costs, and other expenses.
- Expanding Customer Reach: Marketing and promotional campaigns to attract new users can be expensive, and Econet is known for sparing no expense on marketing.
Potential Key Factors
The biggest reasons for the losses could be:
- Increased Competition: Rivals like InnBucks have disrupted the mobile money market, with new players like O’Mari also throwing heavy punches.
- Regulatory Changes: Government regulations have limited mobile money’s traction, imposing transaction caps that directly impact profitability.
Current transaction limits include:
- P2P Monthly Limit: ZWL 16,000.
- P2P Daily Limit: ZWL 4,800.
Since EcoCash primarily earns from transaction fees, these limits cap its revenue potential.
Looking Ahead
We’ll have to wait for the full-year results to see how the mobile money giant performs.
3 comments
That number for the Steward Bank profit seems off
There is an awful lot of “accounting engineering”.
I once asked someone what he did, and he replied, cooking. I later found he was an accountant!