Lights out for Powertime in Cape Town

Powertime, a South African mobile and web-based prepaid electricity vendor, is in trouble. As users in the Western Cape may or may not know, they are no longer able to purchase electricity online. This issue lies not with Powertime, but with the government of the Western Cape, or more specifically, the municipalities.

Powertime launched two years ago as a bright-eyed startup project, servicing most municipalities as well as the major electricity providers such as Eskom and City Power. Based in Cape Town, it became the first vendor to introduce a prepaid electricity iPhone, Android and Nokia app. Their products consist of prepaid electricity tokens, airtime and “Powerstream”, a free monthly detailed electrical usage report. With well over 7 million customers using its “smart channels”, Powertime can be considered a South-African success story.

At 2pm on 14 September, it all fell apart for Cape Town Powertime users. The Cities Electricity Department cut Powertime’s ability to sell electricity online without any prior warning or due notice. This affected 10 000 customers.

Users were left in the dark and confined to the Stone Age-method of purchasing electricity. Withdraw money, find an electricity vending outlet, pay and receive voucher.

What reason did the City give? It said that Powertime could no longer sell electricity over the online mobile channels, access was now limited to SMS and USSD transactions only. Powertime says on Twitter, “We are currently affected by restrictions on mobile vending implemented by CoCT. We’re fighting it!”

Memeburn recently met Sebastien Lacour, MD of Powertime at Tech4Africa. Lacour spoke to us about his company’s issues in the Western Cape.

A mobile mess
According to the City, mobile phone applications were never in consideration as a vending channel. Lacour tells us that the City never specified this in the tender. Bizarrely, it is impossible to use USSD or SMS transactions without at some point interacting with the internet. The City argues that a mobile application is not “mobile”. Lacour was unable to squeeze an answer out of the City.

Powertime attempted to circumnavigate the red tape and struck a deal via an unnamed “vertical monopoly created by City of Cape Town’s ‘one provider’ policy.” Despite having an agreement in place to sell electricity again, the City will not give Powertime back its vending ability.

Cutting the red tape

In December 2010, the City issued a tender for a third-party prepaid electricity vendor to make services available on Internet, POS, ATM/AVM, scratch card and mobile phone channels.

Thanks to the new tender, commission for Powertime has fallen from five percent to two percent, with the City additionally ending all reimbursements on card fees. Therefore, with a lack of commission and costs unable to be covered, it is no longer feasible for small businesses to vend electricity.

In order for Powertime to continue making a profit, it introduced a two percent service charge which was communicated to its client base upon logging in to the service. The City ruled these new fees were unlawful, forcing Powertime to end its services in the Western Cape.

Powertime faces “a serious issue of principle” as Lacour puts it. “Is it really for the City to decide for the user of a service whether they want to pay a value added service fee or not for an innovative and convenient product – especially when our not being able to charge this fee means they lose the service entirely?”

“Has the City really considered the impact that these new channel restrictions will have on service delivery? Note that Powertime currently services more than 40 other municipalities, none of which have implemented these bizarrely restrictive and competition-destroying restrictions on access channels.”

A simple request

Powertime remains determined to find a workable solution for its customers, while being able to meet the needs of the City council. Its requests, it says, are simple enough. “The definition of mobile vending should be relaxed to incorporate IP-based mobile connection, whilst existing internet channel service providers should be encouraged to sell via the incumbent of internet vending and same for Point of Sales. It should be allowed for service providers to, within regulated limits, charge for value added services or the additional costs stemming from certain forms of payments.”

Success stories

Future plans for Powertime include extending its reach past the 40 municipalities it currently supports. Regions such as Namibia, Mozambique, Kenya and Nigeria are part of its vision to expand across Africa.

Adding an EFT and virtual wallet payment option are also on the cards, as well as the possibility of paying annual rates and water bills from the app.

Helping them out

But getting customers back in business is the first priority. “We remain fully committed to the reactivation of Cape Town,” says Lacour. Powertime requires public support and emailing the City to “express your discontent with the City will certainly help in accelerating the process.” Further details can be found on the Powertime blog.