Why Equity, Safaricom pact is key

Safaricom CEO Bob Collymore (Left) and Equity Group CEO Dr. James Mwangi sign the partnership on April 29, 2019. [Wilberforce Okwiri, Standard]

The new partnership agreement signed between Safaricom and Equity Bank is significant for several reasons.

Both companies have demonstrated the appetite for growth and are not afraid of investing the necessary funds to fuel it.

Safaricom’s willingness to invest huge chunks of its cash to grow the business was demonstrated recently when it emerged that a consortium of global players in the technology sector from the US has been forced to come together to face off the local telco in a challenge that could have huge dividends for consumers.

It is noteworthy that the US tech giants‘ planned Sh10 billion investment does not quite match the Sh13 billion that Safaricom spent to roll out its fibre optic network. This means the US tech firms should not expect a walk in the park as they will be meeting a firm that knows its business.

The plight of local beer distributors who dumped long-term relationships with Kenya Breweries when a South African beer maker came calling in the 1980s should be a cautionary tale for local Internet Service Providers who may be tempted to team up with the latest kid on the block, in the event that poses a risk to their existing partnerships.

Customer bases

Secondly, the two firms are at the top of their game and have huge customer bases in their fields. Their explosive growth also led to the starting of thousands, if not millions, of SMEs.

Indeed, Equity Bank is credited for turning around the country’s banking model when it embraced the previously unbanked and un-bankable SMEs. Equity founders saw an opportunity where established players had seen losses.

It may not be coincidental that Safariom’s surge to the front of the mobile firm’ pecking order and profitability was also fuelled by its insight into the potential locked up in the lower rungs and those its predecessor’s elitist view had considered too poor to afford to pay for its services.

The hope is that the new partnership will unlock other potential areas among groups such as small-scale farmers who have been neglected by banks and successive governments.

This will help their operations gain sufficient traction in regional markets. Although markets in Uganda and South Sudan are key the success of the new partnership will be judged on how well it does in Ethiopia and the DRC that have population numbers rivalled in Africa only by Nigeria and Egypt.