Preface

A subsidy or government incentive is a form of financial aid or support extended to an economic sector (business, or individual) generally with the aim of promoting economic and social policy1.

MOBILE money in Africa comes in different flavours. The sophisticated sort, exemplified by services such as M-Pesa in Kenya[…]. This sort uses pre-paid mobile-airtime minutes as a de facto currency that can be transferred between phones, exchanged for cash with dealers…2

كشف د. إبراهيم أحمد البدوي وزير المالية والتخطيط الاقتصادي عن إتجاه للإستفادة من تجربة المملكة العربية السعودية في مجال تقديم الدعم المباشرللمواطن 3

In essense, the new Minister of Finance in Sudan is proposing a new model: give out cash to people. The cash will be in the form of Airtime, the minutes of calls that telecos charge. Telecos have a very large agents network in Sudan and it has grown to extent that they reach remote locations even electricity have not reached it! The standard airtime cash out fees is around 10% but it has grown to 20% during the cash crisis last year. There is no regulation for airtime cash out fees, as oppose of standard ATM withdraw (1 SDG), and as a result it gained huge interest for agents. Until couple of years ago, there was no regulation for the maximum allowed airtime transactions, but it was limited to 1000 SDG (and 100 SDG during the cash crisis). Currently, it was reverted back to 1000 SDG.

Airtime is money

The government proposed a simple subsidy model: give money to poor people in terms of airtime. Let’s calculate that and see what these numbers mean:

  • The target is 900,000 Family (around 4.5 M person), the selection criteria is still not disclosed though
  • The amount is 1500 Airtime SDG
  • The USD rate (Central Bank of Sudan) is 45.1125 SDG 4
  • The USD rate (black market) is 94 SDG 5

Now, let’s see how that work in real life:

  • the Sudaneses government will debit 1500 SDG every year
  • telecos will issue an equivalent of 1500 as airtime to the target audience
  • users’ then can go to a local agent and cash out their airtime

Calculations

Let’s calculate the airtime fees and see how these numbers add up.

1500 Airtime * 10% (cash out fees): 1350 SDG

For 900,000 we have for 1 year:

  • 1500 * 900000 * 12 = 16,200,000,000 SDG
  • Actual price when cash out = 1,620,000,000 SDG

But telecos impose extra fees as well for government. Telecos are service provider for the government. It could be as well 2%, and it could be even more. That is 324,000,000 SDG / year.

Total calculations

Amount Per Interval AIRTIMEAmount Per Interval SDGAgents FeesTelecos Fees from government [SDG]Total Amount
One Family 1 Month15001350150301530
900K Family (all target) 1 Month1,350,000,0001,215,000,000135,000,000‬27,000,000‬1,377,000,000
900K Family (all target) 12 Month16,200,000,00014,580,000,000

A tale of telecs

Telecos airtime agent is distributed in a network. The logic is quite simple, in order to sustain their business. Airtime is distributed on three channels:

  • scratchable cards
  • POS-based airtime credits
  • and recently airtime through payment network i.e., EBS, 6

The bulk of airtime is divided into these channels, through telecos airtime master agents.

Airtime master agents

They are the agents which a teleco distribute its airtime. It is a very tight club that the whole airtime is exclusively distributed through them.

If the said teleco is to issue 1,000,000 of airtime value monthly, it goes like this:

  • it will be distributed to telecos master agents
  • telecos master agents have specific geographical locations that they operate on (and the don’t collide)
  • agents then have their own other agents i.e., master agents on state level (agent 1 for White Nile State)
  • and the chain goes on until it reaches the smallest agent. The one that airtime cash out / airtime cash in happens

This is perhaps the most complex network, and yet totally unregulated. It is a huge monoply, and it is only governed by the telecos. The rules are simple: don’t release too many airtime that it loses it value, and avoid shortage in airtime! Telecos are optimizing for these two constraints.

What telecos make

I tried

You can use this as the economist article is behind a payroll https://pioneer4peace.wordpress.com/2013/01/24/airtime-is-money/

  1. https://en.wikipedia.org/wiki/Subsidy ↩︎

  2. https://www.economist.com/finance-and-economics/2013/01/19/airtime-is-money ↩︎

  3. http://www.mof.gov.sd/%D8%A7%D9%84%D9%85%D9%83%D8%AA%D8%A8-%D8%A7%D9%84%D8%A5%D8%B9%D9%84%D8%A7%D9%85%D9%8A/%D8%A3%D8%AE%D8%A8%D8%A7%D8%B1%D8%A7%D9%84%D9%88%D8%B2%D8%A7%D8%B1%D8%A9/item/683-%D8%A7%D9%84%D8%B3%D9%88%D8%AF%D8%A7%D9%86-%D9%8A%D8%B3%D8%AA%D9%81%D9%8A%D8%AF-%D9%85%D9%86-%D8%AA%D8%AC%D8%B1%D8%A8%D8%A9-%D8%A7%D9%84%D8%B3%D8%B9%D9%88%D8%AF%D9%8A%D8%A9-%D9%81%D9%8A-%D8%A7%D9%84%D8%AF%D8%B9%D9%85-%D8%A7%D9%84%D9%85%D8%A8%D8%A7%D8%B4%D8%B1-%D9%84%D9%84%D9%85%D9%88%D8%A7%D8%B7%D9%86 ↩︎

  4. https://www.price-today.com/currency-prices-sudan/ ↩︎

  5. https://www.price-today.com/currency-prices-sudan/ ↩︎

  6. Even for EBS/CBOS case, they pay in advance. E.g., the pay 1,000,000 Airtime from Zain SD, in advance. EBS have regularly ran out of airtime during the past year. ↩︎