Safaricom paid 1.4 billion shillings for M-Pesa technical support fee to M-Pesa Africa, a 50/50 company owned by South Africa’s parent company Vodacom Group.
The fees were paid in the financial year ended March at a rate of 2% of M-Pesa mobile phone revenue of 82.6 billion shillings during the audit, according to information contained in the company’s final annual report.
Safaricom owes M-Pesa Africa a balance of 185.5 million shillings at the end of the year, making the total payment for that period amounting to 1.6 billion shillings.
The listed Nairobi Security Company previously paid an undisclosed M-Pesa license fee to the UK’s Vodafone Plc, which sold M-Pesa Africa mobile phone brands in March last year for Rs 1.2 billion.
The new agreement will allow Safaricom to reimburse some of the costs of M-Pesa from its share of profits in a joint venture that now provides technical support to the platform.
“Safaricom Plc and Vodacom Group (SA)are M-Pesa Africa Limited joint venture . The company has entered into a service agreement managed by Safaricom Plc to provide technical solutions to M-Pesa products for which fees are charged monthly, “the mobile phone company said in a statement.
“The fee is based on 2% of revenue from M-Pesa purchases on April 1, 2020.”
Vodafone was also charging Safaricom a license fee at the rate of 2% of revenue from the M-Pesa transaction, which was paid quarterly. The actual M-Pesa fee paid was not disclosed, however, as it was loaded with fees for other services that the international company offers.
Vodafone is Vodacom’s largest shareholder with a stake of 60.5% and also owns a 5% direct stake in Safaricom. M-Pesa Africa, registered in Kenya, recorded a total loss of 314.1 million shillings in the financial year ended March on depreciation charges that have the effect of reducing revenue to be paid.
The sale of the joint venture amounted to 3.1 billion shillings with a total cost of shillings 2.5 billion, leaving it with an operating profit of shillings 595.2 million. A depreciation fee of 1.1 billion shillings contributed to the loss over the period under review.
“There are no major restrictions on the ability of a joint venture to transfer funds to Safaricom Plc through dividends or loan payments,” Safaricom said in a statement.
“Decisions on joint ventures to advertise and / or pay dividends or provide capital allocation to shareholders must obtain the written approval of existing shareholders. “