President of IMANI Africa, Franklin Cudjoe, has raised issues with the contract signed between the Bank of Ghana and Sibton Switch to undertake the mobile money interoperability project.
“How much was the company that won the bid hoping to squeeze out of mobile money? An average of $40 million a year for the first five years. Note the point very well: The contract and the financial proposal clearly states that Sibton shall spend $1.1 billion on the project. It must then make enough money from charging the users of mobile money in this country until it has recovered the $1.1 billion and made a return on its investment, beginning with revenues of $200 million in the first five years,” Mr Cudjoe explained in a release yesterday.
Ghana’s recently-launched first mobile money interoperability system allows transactions between telcos as well as banks, making financial services more accessible to the populace.
Vice-President, Dr Mahamudu Bawumia, launched it on Thursday, 10 May, 2018.
The system is expected to largely eliminate difficulties associated with traditional banking services, and make banking services more accessible to the large unbanked population, estimated to be about 70%.
In October 2017, Dr Bawumia said: “There were many people who were offering similar solutions, but thankfully the BoG, in collaboration with GhIPSS, has finally been able to solve this problem…”
“What is even more remarkable about what has happened is that, again, a lot of people were quoting billions of dollars and it became an issue of public debate, but by the way, this system has now been built for less than $4 million dollars,” he said at the University of Cape Coast when he spoke at the school’s Institutional Advancement Lecture last year.
Also at a press conference on Tuesday, 15 May, 2018, a deputy Information Minister, Kojo Oppong Nkrumah, said the Akufo-Addo government saved the country from “unjustified extortion” by the erstwhile Mahama administration by re-awarding the contract to GhIPSS.
“The Akufo-Addo administration at this stage is pleased to have had the opportunity to engage all the stakeholders to correct what would have been an unjustified extortion from the good people of Ghana if the old deal had not being abrogated,” Mr Oppong Nkrumah, said.
According to him, per the earlier agreement, the Bank of Ghana (BoG) agreed that Sibton charges “the users of the platform, and who are the users of this platform predominantly? These are market women, farmers, drivers; people in the lower class are those who massively use these platforms that have been rolled out. Their arrangement was that the company Sibton should charge these people $1.2bn; that is essentially what they did”.
The Akufo-Addo government, he noted, engaged relevant stakeholders to ensure that the system was implemented under a new cost-saving structure.
“Government, through the Bank of Ghana, through GhIPPS, is paying $4.5m and the Ghanaian at the end… who normally use this platform, does not need to pay a private company $1.2bn for their profit. This is a big savings to the people of Ghana”.
Commenting on the development, Mr Cudjoe explained that the most profitable telecom company in Ghana is MTN.
“In its most recent financial disclosure, it revealed a profit figure of about $53 million. If we consider that the profit margins on its mobile money product are similar to its other products, then its profits from mobile money was a measly $7.2 million. But let’s even follow the crowd and assume that mobile money is wildly profitable. Let’s assume that rather than the 7% margin it makes on its general business, it makes 30% on mobile money. This will still imply a profit of only $31 million per annum on mobile money.
“Now here is the meat. MTN has 90% of mobile money accounts and 92% of deposits! So, practically, it makes most of the profits! It is safe to say that the entire profit outturn in the “mobile money industry” in Ghana (on a 30% profit margin assumption) is not more than $40 million per annum!
“Why hand over that amount to a single contractor whose only task was to create an electronic ledger and implement some APIs to interconnect the companies doing all the heavy lifting?” he questioned.
Story: Franklin ASARE-DONKOH
Writer’s email: firstname.lastname@example.org