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Safaricom entry into Ethiopia; Is collaboration the better option?

OPINION
By XN Iraki | May 31st 2021
Safaricom CEO, Peter Ndegwa holds the 2020 Global Mobile (GLOMO) Award, awarded to Safaricom by Global Systems for Mobile Communications Associations (GSMA) in recognition of Safaricom's outstanding contribution to the mobile industry. [David Njaaga, Standard]

Kenya’s and East Africa’s most profitable company Safaricom is finally getting into Ethiopia, our northern neighbour.

It’s a market most corporations have been salivating about. While we are on good terms with our neighbours, we have not exploited the full potential of that neighbourliness.

Somalia should be a market, not a war theatre.

Ethiopia, a fountain of pride, was never colonised. Sudan guards the Nile and once had flourishing civilisations. Sudan has probably more pyramids than Egypt but marketing and strategic interests stand on the way to tourism.

Uganda is the Pearl of Africa and guards the source of the Nile. It’s the country I feel most at home in.

It’s welcoming with an intoxicating culture. No wonder, they are my in-laws.

Our relationship with the southern neighbour is ambivalent, despite sharing a long border. Different political and economic ideologies may stand between the two countries, but we can overcome that.

Enough digression, the diplomats and international relations experts can continue from where I have stopped. I have not even mentioned the least exploited neighbour, the Indian Ocean.

Why is Safaricom entry into Ethiopia so important? I will skip the money part of it and the belief that Ethiopia is a closed market.

Abyssinia, as Ethiopia was formerly called has a legacy of command system, it’s slowly being replaced by a market system sucking in investors in their numbers. But she needs to sort the Tigray problem as she sorted the Eritrean one.

The key focus on Safaricom entry is how she got there, not the money to be made. Instead of being a lone ranger, Safaricom used a consortium, collaboration to get into this lucrative market.

Safaricom could have competed with Sumitomo, Vodacom, and CDC group. But they collaborated and won the bid. Most Kenyans think Safaricom is too big to seek partners.

Yet cracking the global market demands collaboration with bigger players. That increases the chances of winning not just bids but markets. I recall we used to recruit our bigger brothers and sisters to fight off rivals in primary school, very successfully. Bullies met their match. Remember the advert in the local media also shows Safaricom uses both local and international investment bankers and legal advisers.

Is Safaricom going against the grains by collaborating? Economists have a strange obsession with competition, they argue competition drives down costs, improve customer service, spawn innovation and injects dynamism into an economic system.

But the reality on the ground suggests collaboration works as well. It is only that Communism gave collaboration a bad name. Collaboration has taken our traditional societies through ages. We have reinvented collaboration through the WhatsApp group Harambees.

Whether at international or local levels, collaboration works, cutting down costs and creating synergy. One way to reduce costs is by sharing information and experiences. Safaricom and her partners have different experiences in different parts of the world.

Economies of scale

We often forget the real cost of the competition, the money and time spent preparing to compete. What of the emotional investment? Recall the exam stress as you competed? Remember how you won your wife from rivals?

Collaborations also cut down the costs of services through economies of scale. A good example; how much savings would we make if counties, universities, hospitals, and political parties collaborated? Collaborations should be positive, even cartels and gangsters collaborate.

Should other Kenyan firms use the Safaricom model to go beyond the borders? One could ask how our banks crossed the border without collaboration. We can now freely test their model vs Safaricom’s.

The market beyond our borders is bigger and more lucrative. Have Kenyan firms prepared for Africa free trade area? Some of the global firms we admire never made it on their own, they collaborated with like-minded firms or with their governments.

Remember how World War one and two (WW I and II) were won? Noted how countries collaborate through trade blocs such as European Union or East African community closer home?

At much lower levels, individuals collaborated to spawn firms. Remember Microsoft was started by Bill Gates and Paul Allen, HP was started by Bill Hewlett and David Packard while Larry Page and Sergey Brin started Google.

Who collaborated to start Equity Bank? We can make the list longer. Some of the most successful families rode on collaboration to help one another. More importantly, collaboration is part of our African heritage.

It is compatible with economic sense. Collaboration is seen as unmodern but it works. Think of the cha-mas and how they reduce the cost of capital.

Finally, Safaricom for which I am a shareholder should go beyond Ethiopia and cross the Red Sea. 

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