What Free Market. You shutdown mobile money – just like that.

“But as the sun sets on the first decade of the 21st century, that story has already become ancient history. The power of the state is back,” Ian Bremmer, The End of the Free Market.

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On Election Day, frequent users of mobile money woke to a shut-down of the service. Without notification, users were unable to transfer money. The telecoms were silent. The customer care lines were buzzing. There was a scripted answer. “There is temporary interference in the service…”

Somewhere, The Uganda Communications Commission (UCC) boss, Eng. Godfrey Mutabazi talked tough. Tough that it would seem he had a gun to his head. Mutabazi did not exactly state why mobile money had been shut-down. In a blanket statement, “national security” was picked as the reason for the shutdown. The regulator only issued a statement on 19th February 2016 – 24 hours into the shutdown.

The telecoms were loudly silent and it took them six hours to tell their customers the truth. In a manifestation of arrogance at one of the radio talk shows, (Capital FM), Ofwono Opondo, who speaks for the state and the ruling party, stated that no-one had died as a result of mobile money being off. He misses the point.

The shutdown exposed Uganda’s masquerading free-market economy. In other words, someone can wake up one day and with a touch of button turn-off mobile money used by over 10 million people. Shutdown a system which has Shs24trillion worth of transactions annually. The free market was now “safely” in the hands of the state. At least 60,000 agents were out of business for the 3 days.

The senior members of the NRM knew about the shutdown. They too kept quiet. The state had played the “National Security” card. When the spy agencies tell you it is a matter of national security, apparently you can’t ask questions. However, since this was unprecedented and considering the sheer size of mobile money, the UCC ought to have provided explanations. Interestingly, UCC is good at issuing threats. For instance, UCC in 2015 fined MTN Uganda Shs5b for failing to adopt short code harmonization. MTN never paid the fine. Customers have complained about unsolicited messages. UCC issued directives. Unsolicited SMS still exist. On this directive to shut down mobile money, they did not hesitate.

This rushed decision explains another problem for the telecoms. They were threatened. The telecoms obliged. Often they have been let-off by the authorities. Also, 3 days of losses can be recovered. The companies make billions off mobile money. It is cash-trove. That same money that was held on people’s accounts will be eventually moved and the telecoms will earn their commissions on each transaction.

However, the discussion here is not about the losses telecoms may incur. It is rather the reputation of the pseudo free-market system Uganda is operating. It is the fact that the state can interrupt perhaps one of the most important payment systems in the country. In parading national security, – during one of the most important elections – without a single challenge from at least two corporations, the conclusion is that the state is in control. Question is, in whose favor? On that same day, the opposition party, FDC says it had, at least, Shs100m on various mobile money accounts, ready to distribute to agents. These are agents who were supposed to be on the lookout for any irregularities.  They did not.

If a system that transacts nearly Shs80b a day and it is remotely shutdown, without any challenge, then it is safe to say, the financial system can be compromised for political purposes. It is like shutting down the banking system, just like that. The shutdown alone raises Uganda’s investment risk profile but also reduces the reputation of a system that has fostered financial inclusion.

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 “No, because all governments use the tools provided by state capitalism to accomplish political goals, not serve the public welfare. This system allows them to minimize political risks they face by maximizing their controls over activities that generate substantive amounts of wealth.” Ian Bremmer, The End of The Free Market

 

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