Monday, November 30, 2015

Safaricom, Bitpesa and Joe Mucheru

Two startups, Lipisha and Bitpesa are suing Safaricom according to the Daily Nation:
The firms blamed Safaricom for compelling Lipisha, through intimidation, to cease offering the services nearly a week ago with Bitpesa or face the risk of terminating their business.
According to Lipisha, Bitpesa is one of their largest customers hence the suspension results to the stoppage of services to Safaricom.
Lipisha claimed that a large amount of its money is being withheld in Safaricom’s account, a situation which exposes it to a risk of being sued by other customers for multiple claims.
The firms through their lawyer, Mr Kiragu Kimani of Hamilton Harrison & Mathews, said:
Bitpesa is at the risk of collapsing... The suspension of the Lipisha services and the demand that Lipisha stops transacting with Bitpesa is unlawful and infringes on the firms’ rights to acquire and own property, fair administration as well as their economic interests
Safaricom definitely has a reputation of being rather brutal to startups that are built on its platform so this doesn't come as a surprise. The company has it's own remittance offerings in 3 of the 4 countries that Bitpesa operates in. Safaricom, through Vodafone, earlier this year announced a partnership with MTN Group that would see their customers able to send each money across borders using their mobile phones. I guess this is just removing the competition.

This is particularly sad for Bitpesa as they had just expanded their offerings to include Nigeria and Uganda earlier this month. I do find it improbably that their business is going to collapse though.

Bitpesa in February this year raised over $1 million in a second round of funding led by San Francisco-based Pantera Capital. Their first round of seed funding was for $440000 according to their profile on Angelist.

According that very same profile, Joe Mucheru, a prolific angel investor best known for his investment in Wezatele that exited in April this year, not only provided them with seed capital but also is currently serving on their board. Things last evening got interesting when Mucheru was placed at the head of the Ministry of ICT in Kenya. Whether this will get people in Safaricom nervous, particularly as the ministry had once tried to classify the tech giant as dominant, and cause them reverse their decision post-haste remains to be seen.

I reached out to the companies involved but they either didn't respond or refused to citing the ongoing court case.

Update(1/12/12): Safaricom told the judge the reason they decided to block Bitpesa is that the company was not complaint with anti-money laundering laws but Bitpesa countered saying bitcoin is not a something that is regulated in Kenya by the Central Bank of Kenya. From the Daily Nation:
“Safaricom has stringent reporting obligations of the Proceeds of Crime and Anti-Money Laundering Act, which it could not fulfil in view of Lipisha’s relationship with Bitpesa,” said Mr Isaac Kibere for Safaricom.

We'll know on 14 December whether the Judge, Joseph Onguto, chooses to lift the suspension while the case goes on. Peace!!!