The discussions around Safaricom’s dominance are nothing new. We’ve seen numerous arguments around the company’s grip on the Kenyan market, both in the Telecommunications Industry, and in mobile money, and we’ve heard different proposals on what could be done. However, with each passing day, no concrete plans are ever set, and the giant continues to grow.
Safaricom is one of the largest companies in East and Central Africa. In the year ended March 2020, the company added KES. 654 Billion to the Kenyan economy, an equivalent of 6% of the country’s GDP, cementing its position as the single largest contributor to the economy. In the same year, the company paid over KES. 110 Billion in taxes, and registered over KES. 71 Billion in profits.
These are good numbers, and many companies would be envious of Safaricom’s position. Of course, the government of Kenya, with significant ownership of the company, Vodacom, and other shareholders are happy with this position. Things are going really well.
However, with every new year, Safaricom’s control over the market seems not only unfair for competition, but also unsafe for this middle-income economy.
- The unfair part – New and existing companies cannot possibly dream of competing with Safaricom ever. Even if one argues that anyone can enter the market, there are many hindrances that continue to be laid each year as Safaricom continues to grow.
- The unsafe part – Safaricom controls so much of Kenya’s economy, that should anything happen very many sectors will be affected. This includes simple technical failures, unforeseen dip in profits, or even leadership struggles.
While one CANNOT say Safaricom got to its position unfairly – they actually still are the best in communication, customer service, expansion strategies, and much more, things that collectively contributed to and continue to enable their growth – it would be unfair to say there’s still a chance for any other company to rise, or even compete with them. That fact effectively makes them a monopoly.
However you or the government argues against this, the numbers show something else. Here’s a company with 35.6 million customers in a country with 50 million people. Here’s a company that enjoys between 50% to 56% of the KES. 2 Trillion market capitalisation at the Nairobi Securities Exchange. Here’s a company that very many individuals and corporations with small, and large businesses, including banks, rely on not just for their transactions, but also as the basis of their whole business cores. Here’s a company that, for lack of any new phrases, effectively runs a nation, and arguably does so even better than the nation’s own elected government. So, tell me now is that a good thing to have?
This year, with new reports unveiled a few days ago, Safaricom is sitting pretty comfortable in different ways:
- The company enjoys 87% of all revenue from Telcos in Kenya. That includes Airtel Kenya, Telkom Kenya, Faiba 4G.
- The company now has 33.5% marketshare of fixed broadband connections with over 207,000 subscriptions compared to Wanachi’s 201,000.
- M-Pesa still controls 99% marketshare with over KES. 7.2 billion in deposits in the last quarter compared to just KES. 561 Million on Airtel Money, their closest competitor
- Fuliza, an overdraft facility like no other in the market, processes over 5 requests per second. Here Safaricom earns both an interest rate, and fixed daily charges on unpaid amounts.
While monopolies aren’t bad per se, and while Safaricom seemingly hasn’t abused its control, I still believe that there needs to be a conversation on dominance as a whole. A conversation that makes it clear on how much power one company in any industry should have over the market. Because we have many dominant companies. For example, let’s start with the annoying Kenya Power and Lighting Company.
Yes, Kenyans still have the option to choose whichever Telco they want to, and whichever mobile money solution they deem fit. And yes one can argue these other Telcos are the ones that have been very lazy and ineffective at pulling customers, building new solutions, and competing. But if every business or government agency only accepts M-Pesa, what option do people really have? And if the dominant leader makes unmatched billions in profit, how low can other Telcos go without collapsing in an attempt to draw in a significant number of customers, and takeup market share?