The Central Bank of Kenya (CBK) remains committed to separating M-PESA from Safaricom’s other businesses, but a significant tax hurdle needs to be fixed.
CBK Governor Kamau Thugge reaffirmed the planned separation during Thursday’s post-Monetary Policy Committee media briefing.
According to Thugge, the main obstacle is a KSh 75 billion tax liability associated with the separation, for which there is no clear solution yet.
“We believe that there should be a separation and that the Central bank should oversight M-PESA. Therefore, we will continue to engage Treasury and Safaricom to see how quickly this separation should be done,” he said.
“The delay in separation is due to the tax liability, which is fairly significant at KSh 75 billion, and we don’t know what to do with it. But we hold that the separation ought to have happened and CBK should oversight M-PESA.”
2022 CBK initiated talks with telecom companies to separate mobile money activities.
Subsequently, the Kenya Information and Communications Amendment Bill 2022, which was before Parliament, supports this separation for better financial reporting.
“In addition to operating a telecommunication system or providing a telecommunication service as may be specified in the licence granted under Section 25, a person may engage in any other business provided that such person shall obtain relevant licenses from respective regulators of any industry or sector ventured into, legally split or separate the telecommunication business from such other business, and provide separate accounts and reports in respect of all businesses carried out,” reads part of the Kenya Information and Communications (Amendment) Bill 2022.
M-PESA is a dominant revenue source for Safaricom, contributing 42.1% in the first half of 2023.
Previously, Safaricom expressed concerns about potential negative impacts on users, including higher transaction costs.
For instance, Safaricom cites that the current tax structure, lowering bank transaction excise duty while raising mobile money transfer levies, is considered disadvantageous to mobile money services.
In 2020, Vodacom and Safaricom completed the acquisition of the M-PESA brand from Vodafone Group through a newly created joint venture.
In 2023, Safaricom acquired the entire issued share capital of M-PESA Holding Co. Limited, the cash management company behind M-PESA, from Vodafone International Holdings BV.
Currently, the M-PESA platform offers peer-to-peer transactions in countries including Kenya, Tanzania, Mozambique, Egypt, the Democratic Republic of Congo, Ethiopia, Ghana, and Lesotho.
