Johannesburg - Vodacom’s parent company, Vodafone, has partnered with Moneygram in a deal that will extend the reach of its M-Pesa mobile money transfer platform internationally.

Moneygram, a global money transfer service, maintains a network of 334 000 agents that include retailers, international post offices and financial institutions.

The deal will enable users to transfer funds directly from about 200 countries where Moneygram agents are based to the millions of active M-Pesa customers in the Democratic Republic of Congo, Egypt, Fiji, India, Kenya, Lesotho, Mozambique, South Africa and Tanzania, according to Vodafone.

Richard Hurst, a senior analyst at Ovum, said yesterday: “It makes perfect sense. The key is going to be cross-border remittances. There are a lot of migrant workers.”

M-Pesa is a hit in Kenya where it first launched in 2007 and has grown to nearly 16 million users, but it has flopped in South Africa, where stringent legislation has been a stumbling block to growth of the agent network. The service allows money to be deposited and withdrawn from a virtual account using a cellphone and does not require users to have bank accounts.

International remittances to Kenya increased 10.7 percent year on year to $1.3 billion (R14.3bn) last year. The remittances were sent mainly from North America and Europe, according to a report published by Imara yesterday.

In a trading update two weeks ago Vodacom said active M-Pesa customers had increased 24.5 percent to a cumulative 5.8 million users outside South Africa. It was unable to immediately provide growth data for South Africa.

Nkosi Nyanga, an analyst at Imara, said legislation in South Africa required M-Pesa agents to register under the Regulation of Interception of Communications Act and have a tax number.

Mobile money, mobile data and machine-to-machine, or telemetry, services are growth areas that operators have identified to offset lower revenues from voice and SMS traffic.

Dominance by banks of mobile money systems was also strangling growth in South Africa, said Spiwe Chireka, the programme manager for telecoms in Africa at the International Data Corporation.

“The uptake of mobile money in South Africa is expected to grow but because the pay-out or collection points are mainly ATMs or formal establishments such as Pep stores, we believe there is a major bottleneck in the distribution channel which could limit South Africa from fully exploiting the potential of mobile money,” she said.

Mobile money usage would soar in the rest of Africa.

“Key areas of growth include expanding mobile money to incorporate financial services such as micro loans, mobile life insurance and savings options. In the retail sector, the integration of mobile money as a payment platform for e-commerce transactions, such as providing virtual credit cards linked to mobile money accounts as seen in Kenya,” would drive growth.

“The latter allows greater participation in online commerce which has until now been limited to the credit card holding part of the population. Mobile money reduces those barriers,” Chireka added.

Moneygram rival Western Union has partnered with M-Pesa to remit money to subscribers in Kenya and Tanzania.