E-Levy dangerous to our digitization drive-MMAAG reiterates

The Mobile Money Agents Association of Ghana has maintained that the proposed levy on Electronic transactions popularly known as E-Levy is very dangerous for the country’s digitization focus.

The Association argued that some “…4.2million Ghanaians who in times of need and emergencies subscribe to quick loan as a last resort will heavily be slapped with disappointment should this tax go through in its current state, there’s a looming difficulty that awaits the quickloan entity and the beneficiaries”.

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“This you know, will impact us also as Agents.
Our research has revealed that many businesses are going to slow down and economic activities will near a standstill.
Ghana became the first African country to launch a universal QR CODE enabling all Ghanaians to make instant payments from their mobile money wallets, bank accounts and this pride must be safeguarded”, the Association added.

They further warned the proposal if implemented would elicit behaviours that can undermine the cash-lite system and digitisation drive of the economy.

Aside from this, the Association believes millions of young people will lose their jobs; 80% chances of going back to cash system;
an envisaged potential businesses will only be a mirage; Innovative businesses that try to leverage on Mobile money may lose their investment (SMEs).

For them, the levy would take Ghana several years back from where we have gotten to.

“The gap between the banked and the unbanked will widen. Investors in the sector will begin to draw back (Agents) . It will slow down a tall list of economic activities in the country facilitated by Mobile Money. Robberies and criminal activities will be on the ascendancy due to resort to carrying cash for travels. Long hours of doing business will greet us again when people turn to shy from the levy,” the statement said.

Read the full statement below
STATEMENT ON E-LEVY BY MONEY AGENTS ASSOCIATION OF GHANA-MMAAG

This statement is intended to address the 2022 budget statement and Economic Policy of Government for the year ending December 31, 2022 with the e-levy which has Mobile Money as the cardinal focus which undoubtedly has occasioned various issues and controversies at the corridors of relevant parties.

The Mobile Money Agents Association of Ghana as the name suggests, is a body representing individual businessmen and women who have invested into the Mobile Money Ecosystem.

The Association through its members has contributed substantially towards the Government’s key policies such as The National Financial Inclusion and Development Strategy (NFIDS), the Digital Financial Inclusion as well as supporting the growth within the digital financial services ecosystem by registering close to 20 million active users of mobile money. As a Union that obeys all the tax laws, we have been paying taxes over the years hence we believe in the payment of taxes to advance the course of the country. To buttress this, in the year 2020 alone, the total tax paid to government by Mobile Money Operators amounted to over Gh250millions (Ghc2,500,000,000,000) paid the Government through GRA as withholding taxes and Ghc105,000,000 as Business Operating permit ( BOP) to the various MMDAs .

The contribution has not ended here as through the over 400000 Agents and Merchants have created over a million direct and indirect jobs. Assuming on the average every shop has three workers, just multiply this by 400000 and imagine our effort at easing the pressure on employment, It is evident that survival in every nook and crony depends on Mobile money and by implication, digital finance has now become the lifeline of the country’s economic activities both formal and informal.

In the face of this, the ecosystem is saddled with critical life threatening issues like armed robbery, acid baths and others like high taxation, no or little access to credits.
No one including policymakers seem to be perturbed by this unfortunate situations that have existed over the years with daily reports in the media. Government and relevant authorities keep touting the great gains in the industry without making recognition or reference to the Agents network which forms the most essential part of the digital financial drive. This is very worrying.

Permit me to state from the word go, that Mobile Money which was introduced in Ghana 2009 has gone through series of survival stages and has become the most preferred and convenient means of receiving money and transactions over the past few years. In principle, Momo is a decade and two years old but practically Mobile Money is five years old. Yes this fact cannot shy from further discourse. The first seven years was about building, developing, designing, planning, marketing, shaping and reshaping, infrastructure, training and recruitment hence anyone who may want to advance any interest or gains from this sector must act with much precision and caution since in our candid opinion the business is only five years old and must be allowed to grow further into the desired fortunes.

As main capital investors in this digital finance, we are much concerned about the intended astronomical rate of 1.75% proposed by government through the Hon. Finance Minister on November 17, 2021. In the recent years, as a result of Mobile Money, more businesses have risen and by extension have become the main driver of most of economic activities. The presence of digital finance has created and continues to create millions of employment through the establishment of Medium and Small Scale Enterprises. Classical is the recent spike in e-commerce industry and its activities as a result of Mobile Money.

As a Union, after a careful assessment and review of the budget statement and Economic policies for the year ending December 31,2022, and the aspects that concern our operations have left us in shock and felt that Government could look at it again. A budget that has no specific intervention and support to address growing challenges confronting our operations as Mobile Money Agents or Operators must be very disturbing. A sector which government seeks to leverage on to rake in more revenue through imposition of tax must device holistic approach to deal with the increased issues arising in our quest to drive on digital financial activities.

Let it be on record that as a Union we highly acknowledge the payment of taxes to develop the country which on the onset emphasis was placed some figures before you to acknowledge.

One may ask that how this proposed e-levy would affects Mobile Money Agents Association of Ghana and her members. It is instructive to note that in every business, the consumer has a direct relationship with the producer hence anything that affects our customers, affects us as Agents also. The Mobile Money Agents Association of Ghana strongly believes that the proposed 1.75% e-levy with an estimated revenue of Ghc6.9billion if passed in its current state will erode gains made in the sector over the recent times and government’s flagship drive into a digitalized economy, will only be a mirage since consumers would be compelled to use more cash at the expense of electronic payments systems as a result of the expensive nature of using mobile money.

Consumers are very sensitive to price so in the best interest of the business, policymakers ought to do broader consultation for better appreciation of how the Mobile Money industry works before modeling an appropriate upward review in cost of using mobile money so as to keep the market active.

The Government’s MMI, ie the Mobile Money Interoperability when introduced, Users pay a fee of 1.5% on every transaction that is sending money across different network platforms. At the rate of 1.5% as of October 2020, eight months after its introduction, the Mobile Money Interoperability transactions stood at 5.1 million and the value of transactions was Ghc786million. Guess what happened when it was reduced to 1%, transactions rose to 12.1million and at a transaction value of Ghc2.3billion.

These illustrations further go to substantiate the fact that consumers are rational and sensitive to price (Price elasticity). The logic here means that if you raise the transaction fees, usage will diminish and it won’t be a good signal. The other implication is that, an increased usage comes with more revenue to government from corporate taxes, Withholding taxes paid from commissions that agents earn.

If Government is largely going to impose 1.75% on the ecosystem and its consumers, it may end up folding the sector.

The 1.75% on any amount above Ghc100 will be too expensive and detrimental to the sector. Doing a few analysis using Ghc2000.00 with the 1.75% levy, Ghc35 will be the cost in sending to a third-party. Now don’t forget that there’s an existing charges both sending and cashing-out will be Ghc20 which when you add up will sum up Ghc55.00, that’s about 175% increment in the cost of using mobile money which is just too much and unbearable. Beyond increasing the cost of doing business in Ghana, this the Union strongly believes it will hurt the citizens and discourage usage of mobile money services hence the end impact on us as Mobile Money Agents.

In an era where covid-19 is battling the economies and activities of the world, in Government’s quest to impose any levy must do so with an extensive consultation in order to model a tax that will resonate well with the consumer and also provide security for the business.

The proposed levy on Electronic transactions is very dangerous for the country’s digitization focus. It is estimated that about 4.2million Ghanaians who in times of need and emergencies subscribe to quick loan as a last resort will heavily be slapped with disappointment should this tax go through in its current state, there’s a looming difficulty that awaits the quickloan entity and the beneficiaries.

This you know, will impact us also as Agents.
Our research has revealed that many businesses are going to slow down and economic activities will near a standstill.
Ghana became the first African country to launch a universal QR CODE enabling all Ghanaians to make instant payments from their mobile money wallets, bank accounts and this pride must be safeguarded.

While 2020 saw unparalleled challenges brought on by the Covid-19 pandemic, the Mobile Money industry witnessed strong efforts in striving towards cashless societies, entering strategic partnerships to expand the horizons of digital payments and developing new and robust interoperable payment systems.

Despite the challenges and disruptions it caused, covid-19 triggered a widespread shift in the adoption of digital tools. All at once, more people were using mobile services out of necessity. Restrictions on movement and potential risks of handling cash led consumers to quickly turn to digital payments as a safer and more accessible option as the data available indicates. This must be provided enabling environment.

Data from the GSMA reveals the regional growth in the subscription of Africans to Mobile Money and digital inclusivity.
In 2020, African growth in mobile money was at a

Total of 562million registered accounts, sadly, only 162million accounts are active with a transaction volume of 27.5billion valued at 495billion Dollars.

Navigating the data to West Africa, in 2020, 198million is the total accounts registered out of which 47 million active accounts at a transaction volume of 6.4 billion are valued at $178 billion dollars. The above suggests a great strive in Africa’s digitization front and this must be jealously guarded but it seems nearly opposite is what Ghana is trading on and must take cue from Kenya’s experience. Ghana cannot afford to be left behind.

Ghana is not an exception to what happened to these four African countries( Tanzania, Zimbabwe, Kenya and Uganda) that tried to slash high taxes on Mobile money and the consequences thereof. The question is Ghana ready to pay the price of regression? Our policymakers must be extremely flexible with when in policy room so not to jeopardize our very foundation to the anticipated digitized economy.

If the government should continue with this e-levy, as a Union that directly relates to mobile money, we have identified 12 consequences that we will face, these are,

It will elicit behaviours that can undermine the cash-lite system and digitisation drive of the economy.
Millions Of young people will lose their jobs.
80% chances of going back to cash system.
An envisaged potential businesses will only be a mirage.
Innovative businesses that try to leverage on Mobile money may lose their investment (SMEs).
The country would be taken several years back from where we have gotten to.
The gap between the banked and the unbanked will widen.
Investors in the sector will begin to draw back (Agents) .
It will slow down a tall list of economic activities in the country facilitated by Mobile Money.
Robberies and criminal activities will be on the ascendancy due to resort to carrying cash for travels .
Long hours of doing business will greet us again when people turn to shy from the levy .
The cost of doing business will skyrocket.
It will put extreme pressure mobile money ecosystem.

Proposals for consideration