Monday, May 21, 2018


Last week Kenyan telecom company Safaricom, released its results for 2017. The results were met with glee by the shareholders, head shaking by competitors and head scratching by regulators and officialdom in Kenya and much further afield.

For the shareholders the company reported revenues of Kshs212b (about sh6.5trillion) up a respectable nine percent from last year’s Kshs195b. As a result they will paying out a shilling a share in dividends. More impressive than it looks especially for people who bought the share at its initial public offer price of Kshs5 or even better when the share hit rock bottom at Kshs3.

For the competitors they may have to be content battling for second.

"Safaricom controls about 72 percent of the market with 28 million customers, a figure that grew by 11 percent from last year. Voice while still bringing in the bread and butter, is no longer driving the business with their mobile money solution, M-Pesa and data services doing the heavy lifting...

Revenues from voice have been growing four percent on average over the last five years, which pale in comparison to revenues from data service and M-Pesa, which have been galloping at an average 34 and 20 percent respectively.

Regulators will be looking at Safaricom’s meteoric rise and licking their chops at how they can initiate tax initiatives now so they can harvest mightily well into the future.

Safaricom paid the taxman KShs22b (sh728b) last year, a figure that has grow by an annual average of 22 percent since 2013.

It is a moot point now, but Safaricom is a major driver of the Kenyan economy.

This it does by lowering the cost of doing business, by easing connectivity, as well as an efficient money transfer service, through M-Pesa which also doubles as a savings account, offers a credit facility and is fast replacing cash in the retail industry.

Government’s need to be asking themselves how they can enable the telecom industry’s in their selective country be more and more of an enabler in their respective countries.

This would involve not shackling them with too much tax, incentivising investment in low economic potential areas and seeking to actively partner with them in research & development to create greater efficiencies not only in telecoms and their services but also in the general economy.

The World Economic Forum recently reported the curious fact that a disproportionate number of mobile apps were being developed in Sweden. In looking back they discovered that it dates back to the 1980s when the Swedish government made a commitment to have every household own a computer.

The children who grew up with those computers are today’s innovators and developers 30 years later.

"Beyond the easy pickings now government needs to come up with a plan of how it can harness the energy of these fast growing sector to lay a foundation for future innovation. In 1980s Sweden it was the desktop in 21st century Uganda the pervasive spread of the smartphone is as good a place to start....

Thankfully Safaricom is operating in a market that is culturally closer to us than Sweden. Kenya is being touted as an East African ICT hub thanks in no small measure to Safaricom, which through its dominance has brought the phone, a powerful computer, within arm’s length of anyone with an aptitude for computing.

My first desk top computer was 250MB IBM, a reconditioned machine from Sweden (surprise!) that set me back a million shillings. It is now dwarfed by my little phone, which has eight GB of memory and one GB of processing power.

And this is much more processing power than put the first man on the moon in 1969.

The point is this that in dealing with the telecom sector or any sector of the economy for that matter, we should resist the temptation to tax it to death or throw impediments in the way of its development.

Allowed to grow with minimum impediment the small pickings we are hankering for now will be much greater in future.

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