Faceless capitalists prowl on the once dark continent

The table mountain near Cape Town. South Africa is the entry point for investors to the rest of Africa. [Photo: XN Iraki/Standard]

On Tuesday this week a curious full page advert appeared on page 9 of this newspaper. After going through the advert signed by M. Buckers and L.R.M Kraan, I ran out of breath and called a corporate lawyer for interpretation.

Alluding to my intellectual curiosity saved me a fee note. Curiously, the advert didn’t attract the attention of whatsapp groups or social activists. They were too focused on unga. What caught my attention was indirect “effective control” of Safaricom and the timing.

Why just after Safaricom had released rosy financial results? In Central Kenya I am told they say, “muiritu mwega ageragira thome wa ngia.” This is loosely translated, a beautiful girl just passes near the home of a poor man. If he was rich, we would probably look for means to marry her.

Safaricom is the beautiful girl, full of profits and growth. The poor man is the other shareholders from me and you, and the Government of Kenya. Why does Vodacom (suitor) want to buy into Safaricom from her parent Vodofone?

First, let’s get over the web of ownership. Safaricom is currently owned by GOK which has 35 per cent stake. Vodafone Kenya Limited owns 40 per cent. The 800,000 or so Kenyan shareholders own about 25 percent of Safaricom.

It gets more interesting. Vodafone Kenya Limited is owned by Vodafone International Holdings B.V. based in Capelle Aan Den Ijssel, the Netherlands. Vodafone International Holdings BV is a subsidiary of Vodafone Group PLC, a British firm listed on London Stock Exchange.

Have the final say

The firm acquiring Safaricom’s 35 per cent, Vodacom, based in South Africa is also owned by Vodafone International Holdings BV (which has 65 per cent stake). Both Vocadom and Vodafone Kenya Ltd are children of Vodafone International Holdings BV. Lawyers really know how to create jobs for themselves...

In simpler terms, it is like taking money from your left hand to right hand. If the deal goes through, Safaricom will now be controlled from South Africa, not Netherlands or UK. The advert made it clear that they are not intending to take over the other shareholders.

Curiously, Vodafone will retain 5 per cent of Safaricom and retain a board seat. That is how strategic Safaricom is. In the privacy of my mind, I’m still wondering what effective control means to Vodacom and to other shareholders. Why such a move? Should we bother as Safaricom shareholders? I wish I could get hold of board minutes that made that decision.

First, Vodafone PLC seems to have the final say on who is the Safaricom CEO. Will entry of Vodacom change that? Will Vodacom entry be cosmetic? I doubt. It is possible there will be some management changes. Why would Vodafone want Safaricom managed from South Africa and not UK or Netherlands? I think there’s more than meets the eye. Why did Vodafone leave Ghana and Egypt ownership structure intact?

The new ownership will most likely allow access to more markets by Vodacom particularly M-Pesa. Vodacom will find it easier to consolidate its market in South Africa, Lesotho, Tanzania, the DRC, Mozambique and now Kenya.

The entry of Vodacom shows increased confidence by South Africans to take over or control the African market. Kenya has been a hard nut to crack but South Africans seem to have finally figured it out after Castle blitzkrieg was stopped. They have had it easier elsewhere. Their easier route is acquisition instead of starting from the ground.

In the last one decade, South Africans have made strategic acquisitions in Kenya without raising any storm. Old Mutual bought out UAP Insurance just after building the highest tower on the hill and expanded to neighbouring countries. It is not clear whether the owners had “fattened” the firm for sale to South African suitors or South Africans just saw the beautiful girl.

The timing for UAP acquisition was interesting for another reason; it was just about to get to the next generation as the founders aged. Faulu Microfinance Bank was also bought by Old Mutual too which gave South Africans a foothold in microfinance. There have been other South African acquisitions including Crown beverages by Castle, perhaps to make up where it failed in Thika brewery. Make the list of South African acquisitions longer please.

Let us be objective, other countries have been busy making acquisitions in Kenya. Helios (owned by Nigerians) once owned 12.5 percent of Equity Bank. Helios now owns majority stake in Telkom Kenya. They offloaded it to Norfund. Americans, French, Chinese, Koreans and other nationalities are around.

What is attracting South Africans to Kenya?

Some argue that UK is using South Africa as the Trojan horse into the rest of Africa. That statement is not too farfetched. Many multinationals use South Africa as their base, the rainbow nation has better infrastructure, more developed capital markets, and presumably, better understanding of the once dark continent.

It might be a diversification from the home market which has not grown as fast as expected, courtesy of politics. Policies like Black Empowerment might be politically popular but not to the balance sheet or Profit & Loss account. Kenya and other African countries are less mature markets and have a huge potential for growth as espoused by telcos. The returns are higher despite risks.

But not said loudly, South Africans have money, it could be legacy money from the apartheid era or from post apartheid period when economy hummed in the newly found optimism before new realities like corruption hit. That money, in private hands will naturally look for the highest returns.

Some observers argue that South Africans; will not rest till the Rhodes’s dream of building a railway from the Cape to Cairo is realised. Check carefully where South Africans or their partners have invested since the end of apartheid. It should not surprise us if the Rhodesian dream is still valid. Telcos might be more precious than railway.

Will become drones

In the Kenya case there are unique attractions. One is the liberalised economic and political environment that closely resembles laizzez faire. Doing business has become easier for foreigners, there is more freedom for profits repatriation, you are welcome as an investor and job creator.

You have access to the best hotels, residencies and access to power wielders, they be governors, president or whoever you want to see. The new constitution left the country without “core owners”. Our obsession with politics has left the economic front undefended.

Noted as Vodacom was bidding for effective control of Safaricom, our headlines were about unga. Not that unga is not an issue but we must start seeing the bigger picture. It seems with time Kenyans will become drones, working for other nations who have invested in Kenya. That reality will soon start dawning; it does not matter who wins in August 2017 polls.

— The writer is a senior lecturer at University of Nairobi.