As digital payments gain popularity in Africa, new laws introduced may hinder innovation in this sector.

Somali merchants launched protests on Monday, August 19, opposing a newly implemented 5% flat tax on electronic payments, especially those made via mobile phones. The levy, considered "inappropriate," adds to the existing financial burdens faced by the country's businesses.

"One of the main benefits of digital transactions is that they provide financial inclusion for people traditionally excluded from the formal banking sector. By taxing these transactions, the government effectively discourages the use of digital financial services, pushing people back toward cash transactions, which are less safe, less efficient, and less transparent," explained Abdillahi Hashi Abib, a member of the Somali Federal Parliament.

The tax, which went into effect on Sunday, August 18, is directly deducted from business accounts at the point of sale. The government intends to use the revenue to fund infrastructure and enhance security in the country, which has been battling an Islamist insurgency led by the Shebab militants for over fifteen years.

Defending the measure, Finance Minister Bihi Iman Egeh says it is a transparent tax established by a 1984 law, already approved by Parliament. He added that merchants' concerns stem from misunderstandings, without providing further details.

The implementation of this tax comes exactly one year after the introduction of a standardized QR code designed to facilitate contactless payments in Somalia and improve financial inclusion. The tax is expected to be passed on to consumers, with a limited effect on the overall profitability of businesses.

Samira Njoya