Hot on the heels of announcing a record dividend to shareholders, Safaricom CEO Bob Collymore spoke to Tom Collins in May about what lies behind the company’s success.
Located next to one of Nairobi’s busiest roads in a downtown neighbourhood of Kenya’s capital is one of the country’s most iconic and important business headquarters: Safaricom House.
Jutting out from the pavement are two square tower blocks, fashioned from steel and shiny reflective glass, and connected by an elevated tunnel walkway.
For over two decades the company housed within these eight walls has played a major role in the Kenyan economy, rolling out vital telecoms services as well as pioneering world-class financial technology like M-Pesa – a mobile money service that has put Kenyan and African innovation on the map.
In a spacious office on the top floor, Safaricom chief executive Bob Collymore – rumoured to be stepping down soon after taking time out in 2017 to fight cancer – is upbeat, having just served shareholders with a significant payout during the announcement of last year’s financial results.
With a total dividend of KSh74.92bn ($740m), Safaricom’s largest investors – Vodafone Group and the Kenyan government – look to be well compensated for their stakes.
Underpinned by a 14.4% increase in net profit, the largest dividend yet is 30.52% more than a decade ago.
Sounding as much like a fintech czar as a telecoms executive, the boss of East Africa’s most profitable company believes Safaricom’s success is down to the ability of his firm to offer more than just minutes and data, and to act as a gateway to opportunity.
“It’s not just about having a chat,” he says sitting alert on a leather armchair.
“The phrase we use is connecting people to people, people to knowledge and people to opportunity.”
In this manner, Collymore has been eager to steer his firm into non-traditional segments – riding on the coattails of the success of M-Pesa and seeing no reason why innovation should stop there.
Fuliza, an overdraft facility for M-Pesa users struggling to make payments, lent over KSh6.2bn in just one month after it was introduced to the Kenyan market in January.
DigiFarm, which has signed up around 700,000 smallholder farmers to a platform that provides credit and yield-boosting information via an app, continues to grow following its 2017 launch.
With consumer spending hampered due to an extended drought, which has increased food prices and driven inflation, Collymore argues that diversification has been crucial to seeing his business thrive in a tough time for the Kenyan private sector.
“If you look at our telecom growth outside of M-Pesa it’s shocking – it’s at 2.4%,” he says.
“This is a general trend you find with telecom companies. Data prices are coming down. [With] Voice we are at 0.3% growth – that’s called flat. SMS is declining. So if you don’t diversify your revenue streams you have a problem coming.”
Safaricom’s overall growth is largely supported by M-Pesa, with the service expected to account for over half of total income within three years and last year’s figures showing a jump of 19% in mobile money revenue.
Move fast, break things
Driven by M-Pesa’s remarkable success, Safaricom has undergone a transformation from a nimble telecoms company into a large multi-sector institution within the Kenyan market.
For a company whose innovative products are commonly used to justify the potential of Africa’s digital revolution, many are wondering whether Safaricom has the capacity to keep innovating.
Asked what his response to the Silicon Valley mantra of “move fast and break things” is, Collymore situates himself somewhere between the US and Chinese models.
“Take Amazon. Nobody wants to do what Amazon is doing in the West because it’s the Amazon space,” he exclaims.
“China says that’s pretty interesting, let’s do that, and then seven companies will do it and then all compete to make it better. Look at where Alibaba is now.”
Finding the sweet spot between “breaking things” – being innovative – and being able to provide the best product is the goal, he says.
“Move fast and break things, yes, but you also need to keep improving it and have a laser sharp focus on the problem you are trying to solve,” he concludes.
Collymore, like many of his peers, believes that the next innovations will come from the use of data, robotics, machine learning and artificial intelligence.
Though poised to take advantage of such tools, he admits his organisation of around 6,000 people moves “painfully slow.”
“I don’t think we’ve got creating an innovation hub right yet,” he says. “We are still going to try and see that one through and make it work but so far I can’t say it has worked.”
As it stands, the search for the next M-Pesa takes less priority than improving Safaricom products and ensuring regional consolidation.
On this front, a credible challenge to Safaricom’s domestic hegemony has just been launched in the form of a merger between the market’s second and third largest players – Airtel, the Kenyan subsidiary of Indian telco giant Bharti Airtel; and Telkom Kenya, majority owned by the UK-based private equity firm Helios Investment Partners along with the Kenyan government.
The merger brings the competitors’ share of the market up to a sizeable 33.3%, compared to Safaricom’s 64.2%, which has fallen from 71.9% in September 2017.
It is likely to offer a compelling challenge to what some critics have long contended is Safaricom’s unhealthy dominance of the Kenyan telecoms market.
“Am I worried about it? No,” answers Collymore. “My view on the merger is that it will create a stronger player and I think that is good for the market. We’ve never really focused on the competition, we focus rather on the consumer.”
Yet while well placed in Kenya, M-Pesa has struggled to achieve comparable levels of dominance away from Safaricom’s home turf. Forays into Tanzania, South Africa and India have been parried by stiff competition offering similar products.
Safaricom has partnered with commercial lenders like Kenya Commercial Bank (KCB) and the Nairobi-based Commercial Bank of Africa (CBA) in an attempt to grow its products and achieve its local and regional aims.
In the week leading up to its latest financial results, Safaricom announced a new partnership with Kenyan lender Equity Bank, which has subsidiaries in Uganda, South Sudan, Rwanda, Tanzania and Democratic Republic of Congo.
The bank is expected to expand its mobile banking services in partnership with M-Pesa.
Yet looking back on his record of acquisitions at Safaricom, Collymore admits his hesitation to “go out there and buy everything” is partly responsible for the firm’s entrenchment in Kenya.
“My biggest regret is that we haven’t moved forwards into other parts of Africa,” he says. “I’m a little bit of a timid merger and acquisition guy; I’m not the sort of person who wants to rush out there.”
Succession and reflection
Reminiscing about his time at Safaricom moves the conversation onto Collymore’s future, following intense media speculation that he will soon relinquish his position as one of Kenya’s most powerful chief executives. Collymore insists that he’s not done yet.
“No, I’m not stepping down,” he laughs. “I never said I’m stepping down. People say, ‘Well, your contact runs out in August’, yes, but my contract ran out in August two years ago and two years before that.”
But at the risk of becoming a “bit of an autocrat” and with 10 years at the helm fast approaching, Collymore reveals that the time to exit will soon be at hand. For now, he is aiming for August 2020.
Nonetheless, the speculation has sparked a heated succession debate, with the government wading into the conversation by suggesting Collymore’s replacement must be Kenyan.
For his part, Collymore says the board will soberly compare international and local candidates and choose the most talented candidate regardless of nationality.
How would the enigmatic CEO of one of Africa’s most significant homegrown companies like to be remembered?
Collymore jokes that he has already read his own obituary after receiving words of kindness during his illness. He hopes to be remembered for more than growing shareholder value and increasing profit.
Indeed, over the past 10 years Safaricom has evolved to represent something very personal for the jazz-loving executive, reflected in his numerous community outreach programmes ranging from a Saturday youth orchestra in Safaricom House, to teaching children classical instruments in Kenya’s slums.
With a Kenyan passport alongside his British paperwork – and obvious love for a country to which he owes his “self-actualisation” – the emotive link is evident. Leaving the firm that he has done so much to shape is likely to be a wrench.
“I will miss it [Safaricom] terribly,” he says.
One of Safaricom’s key messages to its customers in Swahili is “nawe kila wakati” (“always with you”). This may yet prove true for Bob Collymore.