Customers from different walks of life are regularly visible at Amon Gumisiriza’s mobile money kiosk located along Wampewo Avenue. Today is different. It is 11am and Gumisiriza is sitting in his small kiosk waiting for one more person to deposit or withdraw money from their mobile money account.
“There are no customers,” he says when I ask what happened to the queue that I normally find whenever I bought airtime from him.
“Whoever comes here is just complaining about the 1 per cent tax. The transactions I am doing are small. By midday, I could have had five people withdraw at least Shs5m. Today, no one has even sent Shs500,000,” he says.
In its pursuit to hit Shs16.2 trillion revenue target for the financial year 2018/2019, the government introduced a 1 per cent tax on mobile money deposits, withdraws and payments. This means when an agent deposits Shs20,000 on your money account, you incur Shs200 as tax. When you send Shs20,000, you incur Shs200 as tax and to withdraw Shs20,000, you still incur Shs200. This is besides the total cost of Shs2500 you will pay as sending and withdrawal charges.
Although he says it is too early to tell the impact in terms of volumes, he says by yesterday evening, majority of his customers were withdrawing what he thinks are their last savings on Mobile Money rather than depositing money on their accounts. Customers are now more cautious and are initiating conversations on what it takes for them to do a transaction in the new tax era.
“They are asking for explanations on the total charges but once you explain, they take the money to the bank. Every time I explain to anyone with big sums to transfer, they just walk away,” he says.
Before we dive into a deeper conversation, Ashraf Kafumbe, a procurement manager at BMK Limited approaches the kiosk. He visits Mr Gumisiriza’s mobile money kiosk on a daily basis but is now vowing to return to the bank if the current 1 per cent tax is maintained.
“On average, I have been sending Shs8m to Shs10m because I am in construction and I have to pay salaries and suppliers but if you are going to charge me that much, why don’t I go to the bank,” Mr Kafumbe says.
He further says there is grumbling among people he makes payments to, as a result.
“They are complaining saying the money I send to them is hardly the actual sum they should be receiving. I have now decided to ask those who are willing to lose part of the money through tax to receive it through mobile money and for those that are not willing to incur the new charges, I will use their bank accounts,” he said.
For Mr Gumisiriza, an employee, decisions such as these are a bitter pill to swallow. “It is going to derail the progress of mobile money business. I do not know if we shall continue to work because we earn the highest commission on big transactions made by people like him. For transactions less than Shs100,000, you earn little commission,” he says.
On a good day, he admits to transferring about Shs8m to Shs10m with just one telecom service but as of yesterday evening, he had made money transfers worth Shs5m, both Airtel and MTN mobile money combined.
Rita Nagawa, an Airtel money agent at a busy taxi stage describes the new tax as a “real disadvantage” to her business because it threatens her only source of survival. Having received about 25 customers yesterday, she says the new tax is hitting her customers hard.
“People were sending money every day. They have now reduced because of the new tax tariff. Someone transferred Shs600,000 on phone and I had no better way of explaining how they had incurred about Shs40,000 in charges other than tell them the new tax is inclusive,” she says.
She now faces the pressure of raising a good commission at the end of this month.
“In the past, I have been earning up to Shs400,000 in a good month as commission from Airtel. I think this month my commission will reduce because someone came here in the morning to make a deposit. Once I told her about the costs involved, she refused to transact,” Ms Nagawa says.
For David Makumbi, an Airtel money agent, much of his work is now punctuated by money withdrawals, which in itself is a good thing for business now.
“Before the new tax, there was an imbalance as many people were depositing other than withdrawing money. We earn more money from withdraws than deposits because the charges are higher than those on deposits,” Mr Makumbi says. The question is how long this spate of withdrawals will last.