Venture Capital in Nairobi - VC101

A talk on venture capital (VC) was given by Vincent Kouwenhoven and Brian Hirman of the eVA (eVentures Africa Fund BV) at the iHub in Nairobi. They both have about 15 years experience in VC and enumerated the criteria the fund uses for investments including that target companies in Africa should have profitable track records (not start-up's) to qualify for VC investments of between 25,000 and 250,000 Euros (~Kshs 2.5 million to Kshs 25 million).

The fund was launched in January 2010, and in the ½ year they have invested in 5-6 companies. The founders are seasoned travelers in Africa and their interest was piqued by observations they made over the last three years including;
1. Chinese investment interest in Ghana and Kenya
2. Arrival of fibre optic cables
3. More African returnees returning from the Diaspora who were setting up their own companies (it’s a good sign). They have been exposed to Kenya for many years and sense that entreprenual spirit in Nairobi is very good as are competence levels in high technology sectors.

- All their investment are active in the digital scene – whether mobile, internet, communication platforms – and include a leading internet company in Ghana, while in Kenya, they have Jumuika, Ratio Magazine, and the latest deal signed today is for an investment in Verviant (w/ Liko Agosta better known for Pesapal)

- They invest growth funding in companies and try and cultivate a healthy portfolio, unlike other VC’s who make several weak investments in the hope that one or two will payoff and offset the failures. Their investment clearly spells out the use of proceeds/funds which can vary, but ideally should not be for increased salaries or other debt repayment (unless to retire expensive debt). They also mentioned that their investment criteria is a guide, not cast in stone (e.g. Jumuika was a startup)

- They get involved in the operations of the company; whether marketing, technology, financial, entrepreneurship, HR policies. They act as a sounding board and advise owners (use skype a lot) on how to scale up e.g. when they get traction, how to set up customer care capacity

- They seek out committed entrepreneurs – not part timers, or people with one good idea they have not developed, or people with a dozen ideas (not focused). They want to invest in people with the gut and belief to start a business and are willing to eat bread & water to hack it put (not one who relies luck) - and who also enjoy what they are doing. Other "no no’s" include people who ask for too much money that dilutes their equity (EVA want founders to retain at least 51% at all timea), or which enables them to run the business without risk for two years (i.e. with the VC’s funding)

- On exit strategy their preferred rout is a buyout of the company within 3 to 7 years by multi-national or larger company. In cases where an investor may not be ready to sell, the VC can sell their stake to another VC.

Twitter Week: Top 10 (December 11)

Twitter is a micro-blogging tool that is really nifty for doing mini-posts, forwards and other remarks that (are on any subject) and are maybe not worthy of a full blog post. Here’s a summary of my week on Twitter in a Dave Letterman top 10 format covering Bill gates in Nairobi, tiger woods gets (in)famous, Nigerian banking wars, Nairobi is becoming a tech conference hub, Fibre cable starts to take effect , and Kenyans are bad dressers but fast drinkers!

10 Get on twitter and new media before it’s too late - New Kenya airays rugby page seems to confirm @KenyaAirways is the legitimate KQ twitter a/c http://tinyurl.com/yjuzj92
- The Rwanda president @paulkagame on twitter? @gotissuez @ngeny @towmee there's a link on paulkagame.com to @paulkagame; looks legit but poorly managed account that can improve
- R/t gtbankonline Guaranty Trust Bank launches NDANI their e-News Quarterly e-zine, http://ndani.gtbank.com/ #notlazycheapkenyanbank
- r/t @mkaigwa Dear Equity Bank, you're the Safaricom of banks. Okthanksbye. #Dontmeanitinagoodway #ReasonwhyIhave2bankaccounts
- Musician Suzanne owiyo features in new #equitybank 'ni member' TV ad

9 Funny Money Tales: - the gambler who lost $127 million in Vegas http://online.wsj.com/article/SB125996714714577317.html (via @WhitlockJason)
- Nairobi star headlines today: Kalonzo denies link to 1 billion farm sale, Ruto to raise 8 billion campaign fund by 2012

8 Beer not clothes - New bar Another brand new bar in Nairobi, already full on day 2
- @rafikiz @jamesmurua is the new off-shoot of @Bacchus at old treasures langata rd
- r/t @towmee No offense to my Kenyan tweeps but at the airport i knew KQ had landed just by how dull the passengers are dressed #notsapuers

7. Kenyans government churns through money - r/t @alykhansatchu Kenya 2nd infrastructure bond oversubscribed 138% http://bit.ly/6205Lf surprised at insatiable appetite for GOK Paper. Lots of foreign interest at ~12% coupon @alykhansatchu as you said
- Bloat in Kenya government is mass employment and needless parastatals & committees-latest is 'national tourism crisis management committee'

6. Top Kenyan business women - Nominate a top 40 woman under 40 to Business Daily http://www.businessdailyafrica.com/ top40under40_at_nation.co.ke D/L 16/12 to join @justdes you can run for re-election and I’m sure you'll be re-nominated #top40

5. Tiger, Tiger, burning... - Tiger may have to bail as marriage costs more each year but his sponsors need a good family image http://tinyurl.com/ykg7lk7
- Only @TheOnion can tell it: "Investigators Still Piecing Together Weird-Ass Clues in Fucked-Up Tiger Woods Crash" http://bit.ly/8WGsZ8
- *Yawn* bill Clinton jokes being recycled into tiger woods jokes
- Tiger at #9 http://tinyurl.com/yl6cpmb but yet to be nabbed at on golf course unlike a famous Kenyan
- Go On Be A Tiger: Accenture (nee Arthur Andersen) advertisement http://tinyurl.com/ydz4un9

4. Bill in Town - #nairumor bill gates private jet is at Nairobi airport.
- @coldtusker he has 3 bombardier challengers

3. Kenya becoming tech conference central - Mobile Web East-Africa is coming to Nairobi - make sure you're there! http://bit.ly/4po1zi (via @mato74)
- R/t There are some available seats at the @ushahidi user group meeting at Strathmore University. Come on by! #UshMeet

2 Cheaper fast Internet becoming a reality: - Now that there's #fibre in Nairobi, i can finally watch the fascinating #TED Talks videos http://www.ted.com/index.php/talks
- ad in standard today - Kenya data networks say free Christmas wifi internet till January 4 http://www.kdn.co.ke (but nada at website)

1 Nigerian Bank Wars: - r/t Deadly news. Bank PHB of Nigeria reports 15-month loss of $2.5 billion: http://bit.ly/7xPwj7 .That is lethal (via @obionyeaso)
- @coldtusker 9-month pre-tax profit of all banks in kenya this year is about $500 million
- Nigerian bank wars via @obionyeaso another full page ad describing new mgt of bailed out banks as 'undertakers' http://bit.ly/4r2aIY

Zuku Slashes Kenya Internet Prices

thanks K for the Breakfast invite

It’s been a big year for Zuku of the Wananchi Group - they got new funding and the fibre cable reached in Kenya - they are a shareholder in TEAMS which is operational (but not yet launched) and have also bought capacity on Seacom. Their CEO said the 50 gigabytes they have on TEAMS will serve the anticipated needs of their Kenyan customers for the next decade and they have the option to increase capacity on either cable.

Reduced internet prices: This morning (2/12/09), Zuku announced reduced internet prices of ~50% as follows for wimax package:
• Prosurf (256Kbps) 3,000 Kshs 1,500 (~$20)
• Supersurf (512 Kbps) 6,000 Kshs 2,500 (~$33)
• Megasurf (1 Mbps) 10,000 Kshs 4,500 (~$60)
The one time installation cost has also gone down from 5,800 to Kshs 3,000 lowering the entry barrier for homes

For small corporates and SME’s they have new Zuku Biz which is unlimited corporate broadband packages priced as follows:
• 10Mbps will cost Kshs 10,000 per month (~$133)
• 15 Mbps will cost Kshs 15,000 per month (~$200)
• 20 Mbps will cost Kshs 20,000 per month (~$266)
For these installation costs are Kshs 3,000, and equipment and VAT are included in the pricing, with security services offered at an additional cost (firewall, e-mail security, spam management)

Reaching out to property developers Zuku is currenlty available in Nairobi Nakuru Mombasa and Nyeri are already wired, and in Nairobi 40 buildings are fully wired with another 100+ having cabling up to their doorstep. By reaching out developers and property owners, Zuku hopes to convert planned, new, and existing buildings to be internet-ready properties that meet the modern demands of some of their prospective tenants for high quality affordable internet. Zuku have a dedicated team to liaise with property owners on right of way, and installation issues for buildings. (Here's a list of Nairobi fibre- ready buildings)

New Nairobi Hotel: The Zuku breakfast took place at the new Ole Sereni Hotel on the edge of the Nairobi National Park, off Mombasa Road. The building previously housed the old US Embassy in Nairobi prior to its conversion to a 134 bed 5-star hotel. Like the adjacent Panari, Ole Sereni also lies close to Nairobi’s Jomo Kenyatta Airport, shielding their guests, and transiting airline passengers, from some of Nairobi’s (now) notorious traffic jams. Though not yet officially open, and with some facilities yet to be completed, management says the hotel rooms are already fully occupied. Wildlife in the park can sometimes be observed in the early morning, and should become a regular occurrence once a waterhole is completed (inside the park fence) to be observed from the hotel’s dining room and bars which have a (relatively) pocket friendly Tusker price of 195 ($2.6)

Week on Twitter: September 22

Another re-cap of a week full of Twitter - @bankelele posts which included issues like Olympia prepares for shareholders then postpone AGM, a skunkworks forum and a fibre summit are coming to Nairobi this week, but how is the fibre being used in government? There’s a new newspaper from the government of Kenya and a new magazine from EAM. Charterhouse bank may re-open while PTA bank has a silent bond, Kenya airways flies to ndola while Emirates air starts selling world cup 2010 packages, and finally twitter matures by enabling medical advice for Kahenya, drawing in the US ambassador to Kenya and also by helping Stanbic Bank improve customer service

- East Africa Fibre Summit - in Kenya next week http://www.aitecafrica.com/...
Emirates Air starts selling 2010 World Cup South Africa Packages http://tinyurl.com/pbj7e3 (where's SAA, @kenyaairways, Ethiopian?)
New GoK newspaper title Kenya Today; first issue has bullet trains, brigadier Ali, SMEs, IdiAmin, MJ, and rants about parliamentary dictatorship & NYTimes writers – all at a cost of Kshs 30/=
- @SupremeGREAM I'd be very surprised if Charterhouse Bank reopens. It will be like re-licensing Triton; @kachwanya is correct, something is smoking at Charterhouse http://bit.ly/3lk8d2
- R/T @kaboro Skunkworks Tech & Entrepreneur Forum, 29Sep Speakers: Liko Agosta, Verviant, Joshua Wanyama, Pamoja, Alex Gakuru.
- Help @kahenya with medical advice http://bit.ly/1YDJ3F #rhabdomyolysis
- @RookieKE CFA one very tough exam, it has driven some very bright professionals up the wall. CFA pass rates Level I: 46% Level II: 41% Level III: 49% @kainvestor http://tinyurl.com/mwegha i salute those who have tried it
- Tiomin say they have made progress with Canadian and Chinese investors on #kwale. Wait till they get to environment minister #michuki
- Kenya government has asked all ministries/agencies to email copies of procurement tenders - to be complied at a portal http://www.tenders.go.ke/ ; also http://www.tandaa.co.ke/ which is "all about Kenyan content" has NO KENYAN CONTENT! Just Anheuser Busch, French news, love in Warsaw...
- @kenyaairways 44th destination launch flight lands in Ndola #Zambia http://bit.ly/hMFk5
- Barclays waives joining fee for gold (6K) & classic (3k) cards http://www.barclays.com/afr... #youllpaysomehow @coldtusker i have no credit card, i can usually tap family or friends #TIA
- R/t @joosi @davos World Economic Forum (WEF) to be in Tanzania May '10. Nairobi star said kofi annan steered it away from Kenya’s bad leadership
-
#Newshot and #bullseye are not too funny: seems marende may have banned use of parliamentary clips for satire. Did njoki spell stakeholder as steakholder in her protest letter? #NTV
- Sunday nation writes about US ambassador on twitter @usamb4reform, but twitter yet to be taken up keenly in Kenya unlike facebook
- Nairobi water company appoints 4 debt collection agencies
- PTA Bank has a $21 million 14% bond in Uganda closing Oct 2. Pity they stopped updating their website http://www.ptabank.org
- New women's magazine called Move out this week from EAM, costs just Kshs. 80 ($1) http://www.drum.co.ke/node/... was true love too pricey for the ladies?
- Twitter improves bank service R/T @coldtusker Thanks to @StandardBankGrp I got a call from CFCStanbic Kenya re: my problems at the bank
- R/t @kainvestor Kenya Ministry of Water office connected to fibre cable! But nobody knows what do with it...just watching movies online.

Olympia CEO comments South Africa has been a real challenge, but we still believe in the market M Matu http://tinyurl.com/klheg7 ; later Olympiacapital muddle continues, now AGM postponed to 2nd-oct cause delayed fin statement dispatch

Twitter Week: KQ Strike and Equity Profit Dips

Twitter is a micro-blogging tool that is relly nifty for doing mini-posts, forwards and other remarks that (are on any subject) and are maybe not worthy of a full blog post. Here’s a summary of my week on Twitter:

- @coldtusker @kenentrepreneur the tea board of Kenya wishes to remind you that hawking of green tea leaf is
- Signed up too many usgov twitters to keep with #hilaryafrica. Will edit after her trip
- This is a good time for generator and diesel sale companies. I think there was a tax break for generator sales mentioned in uhuru's June budget speech. No power last night, or this afternoon: will ignore the power ration schedule as a work of fiction KPLC. As bad as Nairobians complain about #KPLC the water crisis is of more concern
- R/T @shiroh the Stanchart diva trip is such a deal. $1,000 for 5 (shopping) days in South Africa for Ladies (incl, flights, hotels)
- Ethiopian Airlines net profit was $118 million, revenue up 33% with new airbus & Boeing orders pending. R/T @Jellyfish78 Kenya Airways vs. Ethiopian Air on Youtube is an informative but nasty spat http://bit.ly/13N34f and http://bit.ly/CM7Np. Also Ethiopian Air to fly Addis-Mombasa (via Kilimanjaro) http://bit.ly/OHsGq
- Diasporans giving up on Kenya http://bit.ly/K78g7
- Tahidi High tackles the mystery of paraffin in high school food
- On CitizenTV Delamere family shot live video in court and in jail. How? Still it’s a good spot light on the archaic judiciary. Delamere’s say Kenyatta family owns their dairy now while neighbours want to grab their 56 000 acre farm. Tom delamere testimony live - shot two dogs with two shots and denies he shot the man who died. How did 'top lawyer' tom ojiambo allow this?
- R/T @milonare Impunity starts with you, remember that when you cut in traffic and feel nothing. We reflect our leaders #fractals #Kenya
- Barclays Kenya raising credit card rates to 3.0% (up from 2.5%) from next month
- r/t @mainat Banks have reduced lending not because of interest rates but poor prospects of recovering loans in an economy that has stalled
- @rookieKE if you bank with consolidated, you can transfer cash from A/C to Mpesa using your phone
- You can get to the top of KICC Nairobi for $2 http://www.mamamikes.com/bl... (Though I believe Times Tower is higher)
- r/t @highwayafrica09 Call for Nominations - SABC-Highway Africa New Media Awards. See http://highwayafrica.com
- R/T @LarryMadowo FYI Equity Bank H1 PBT down 15% on one-off transaction last yr related 2 Safaricom IPO, Q2 profits up 25%
- Blog job: write about blogging, social networking & social media from Asia, MidEast and African countries http://tinyurl.com/ljxmcp
- R/T @kachwanya TEAMs shareholders seem to be the confused - there is no onward connectivity between Europe and Dubai, where TEAMS ends!
- Kenya stockbrokers association (KASIB) launched investor education handbook today http://www.kasib.co.ke/
- So @kachwanya @kainvestor, Nairobi City Council earns 14sh ($0.2) for every flyer tossed out of a car window?
- R/T @alykhansatchu #Kenya new 234 item price basket will track mobile-#cellular and computers charges & #camel meat #inflation
- So many aviation colleges in Nairobi with unemployed graduates, these (striking)@kenyaairways workers should know this
- Spent 15min at Nakumatt queue while some afro-diplomats paid for groceries with us $. Their exchange rate is KES72 =$
- COTU's Francis Atwoli is going to brag about ending the #KQ strike, and coming through for workers.

Mindspeak with Professor Calestous Juma

The Nairobi lecture circuit has many forums which have yielded some interesting talks - such as from the leadership forum (run by British Council) that hosted Safaricom CEO Michael Joseph, and Nairobi Town Clerk John Gakuo, Kenya Alliance of Resident Associations (KARA), NCBDA which had British High Commissioner Edward Clay and also the Nairobist/tujuane entrepreneurship entrepreneurship series.

I made my first attendance at the Mindspeak series which had Harvard’s Professor Calestous Juma give a talk in Nairobi on July 17 2009. It was hosted by Aly Khan Satchu of Rich.co.ke and the professor was making a return talk to one he gave about a year ago.

The theme today was Rebooting the Economy – Technological Innovation & Africa’s Growth Prospects - on how Africa can use technological innovation to stimulate economic recovery, spur economic growth and spread prosperity. It was timed to coincide with the landing of the Seacom Fibre Optic Cable (to be launched ion July 23) which, at a cost of $700 million he called the largest foreign investment in east Africa since the Uganda Railway.

some notes from the talk in an A to Z sequence

Drivers of economic growth
1. Infrastructure – roads, electricity
- large continent of Africa has very little infrastructure (roads, railroad, power distribution) yet despite this has grown faster than most economies (except Asian) this has mostly been driven by mineral
- China has great interest in Africa minerals, but in order to move minerals, they also build up infrastructure, which is why African leaders have been cozying up to china. They are also admitting more African students to Chinese universities (building engineering capacity) and they always plan for these students to return to their countries
2. Technical education – build capacity in the engineering sciences
3. New business creation in the private sector

Technological abundance
- we must acknowledge technical abundance in a world today where technical knowledge doubles every 14 months now
- There are 880 satellites in space as at April 09, and cell phone use, GPS would not be possible. Also planned other3b network spearheaded by Google could go live in 2011 will cover most of Africa and the tropics a series of satellites design do
- first cell phone in Kenya cost as much as a 4 bedroom house in buru buru according to information PS bitange ndemo (then about Kshs. 250,000)
- What will Fibre will change? Right now it takes about 40 seconds download the wall street journal homepage from Africa, this will reduce to 15 seconds – and bandwidth cost which are as high as $8 per mbit in west Africa can’s compare to the $0.12 that US universities pay. Fibre also costs 1/10 to install compared to what it costs 10 years ago, and storage has gotten much cheaper (emergence of cloud computing, and OLPC has no hard drive).

technological advance are not just in IT but also other sectors

Education sector Links
excamples
- Moi University bought the (collpased) rivatex factory, and its now operating at 10% with the main challenge being lack of cotton. Move departments there, students spend time at factory, updating curriculum
- Pontifical catholic university of Rio de Janeiro has a genesis institute that is a business incubator – and they graduate companies alongside with their students
- Pohang Science & Technology University in South Korea is the best in Asia is an example of how business can create universities
- Kenyan ministries have training institutions that should be upgraded to universes (but only at post-graduate level so as not co compete with basic universities)
- Give young people technical literacy, such as with the $100(OLPC) laptop. Rwanda has become the global learning center for the OLPC, which was unfortunately bad mouthed by competitors which scared off other African leaders from embracing it

Energy:
- wind power can have great impact, and peaceful Somalia has the potential to supply a lot of wind power to the east Africa region, there are new wind power turbine and technology 9suc as Canadian Kite)
- solar also had great potential over next few years, and European countries plan to build solar farms in Sahara desert for their power, while Taiwan plan to launch a 1-passenger solar taxi later this year. Best technology for solar is from Israel engineers and firms, and African countries should learn from there
agriculture
- Genetically modified foods which resist pests, require less chemical and drought resistant (so far SA, Burkina Faso, and Egypt)
- advance in fish breeding, add a growth hormone (not GM) to salmon, and soon tilapia, and will see fish mature faster
- European countries concerned about GM foods are also big investors in that area, so African should target agricultural products that are relevant to Africa

Going Green
- used to mean paying more, but it is becoming pay less
- The future is sustainable, renewable energy, use of nano technology etc. Africa is not tied to polluting technologies and can start afresh using green technologies. e.g GM seeds – farmers don’t have to buy pesticides, don’t have to weed (turn over their farms) which means soils hold more carbon & moisture

Health
I.e. Africa has still very high maternal mortality
- Costs of ultrasound come down from $20,000, to $2,000 in a few years, and plans to cerate cell phone device that cost just $100 (and this is replacing the doctor’s stethoscope)
what do these mean for Africa?
These are not innovations unless they spread in the market place

Innovations Waves have occurred in the history of the world

1st 1785-1845: water power, mechanization, textile industry
2nd 1845-1900 steam power, steel industry, and cotton industry
3rd 1900-1950 electrification, chemicals, internal combustion engine
4th 1950-1990 petrochemical, aviation, space
5th 1990-2020 digital networks, biotechnology
6th ---- (should incorporate Africa, renewable energy, nano technology, Fibre)
With each, with the periods getting shorter and with more countries are drawn into the world economy each time if they utilize the chance to add knowledge to their economies (upgrade their software)

Military Links
Private sector can’t do it alone. African countries must explore us their militaries to do infrastructure - building roads, irrigation channels, dams, – they have the capability, discipline and knowledge (roman roads were build by the military)
- Military colleges should expand curriculum to be engineering colleges

Other aspects of growth
- venture capital – linking those with capital to those with ideas
- international trade – out exports under AGOA have been limited
- regional integration –enable close regional trade, otherwise we will not be bale to export to far countries
- Security – many countries spend a lot of productive resources on idle military. A controversial proposal was to embrace AFRICOM (whose tenets are defense, diplomacy and development), also equip diplomatic missions to identify emerging technologies that can benefit their countries.
- Executive dynamism – to link the business, academia and government to work together and transform economies. E.g. Rwanda has a minister of science who operate from the office of the president

Q&A
- How is Kenya doing? Creation of national economic social council (NESC) good start. Needs to be specific; many forums are held in Kenya achieve nothing because they are too general - and vision 2030 will only work if driven by executive not ministries
- How can Diaspora contribute to development? African absorptive capacity of Diaspora returnees is still low – countries need to have office dedicated to harnessing the efforts of their Diaspora to meaningful economic development, and also give those structures that resemble what they are used to. Kenya now has a Diaspora department in ministry of foreign affairs. Also don’t try and get Diaspora to contribute to Kenya simply because they are from Kenya - treat them as professionals, and shield them from petty politics
- Change from innovating in wants to needs like food, water, electricity? Professor argued that innovations like ultrasound, mobile phone, GM foods were no loner wants but needs
- Food production in Africa? president of Malawi was cited, took over as president at a time that country was in famine. Set out to fix sector, and controversially made himself minister of agriculture, shift in subsidy from consumers to subsidy of farmers enabled them to transform in two years and produce surplus harvest. Prof Juma that more African presidents should also hold the agriculture portfolio in charge of food security) later also became minister of research as he realized that country had reached limits of production under the current methods/processes
- How can Africa improve governance? Train our leaders (model institutions based on the Kennedy school) as some bad leadership comes from ignorance not malice. Also More information and transparency (media & exposure) will make corruption more difficult,
- How have other African countries (SA, Nigeria) used the fibre? Other countries have fibre in West Africa but business model was wrong, targeted at expensive customer and SAT3 has about 5% utilization. In this case give free access to bandwidth to universities to enable them to digitize their records. Wants to see a local animation industry in Kenya, wants to see Kenyan university lecturers teaching other countries on African history and culture to the Diaspora, beam signal right form here in Nairobi
- Any intellectual property rights in Kenya? Professor Juma and others wrote industrial property rights in Kenya yeas ago (KIPI)

Want more?
- Prof Juma has set up a multi-media centre in Kisumu with KCA University
- He will be a giving a talk targeted at the education sector on July 21 at the Kenyatta International Conference Center at 4 PM

M4Change Nairobi

The Mobile Tech for Social Change camp (m4change) was held last Saturday (June 27 2009) at Strathmore University Nairobi, and was staged by @afromusing and @jessicacolaco

More presentations and pictures are at the Wiki page, and these are my notes from attending a brief part of the talk on mobile applications in the morning

- With regard to mobile applications e.g. MPesa, (developers should) just create them, and let users sort themselves out e.g. a credit society that has 4 managers who are signatories, each one enters one (secret) digit of the society mobile PIN# to enable a mobile transfer transaction
- Wanahabari is a text to mobile application for journalists
- You can buy prepaid electricity via mobile phone in Rwanda
- Alternatives mobile browsers to opera include skyfire and mobileXL
- Safaricom is buying out leading developers in Kenya who may develop applications that compete with them (is that a bad thing?)
- While there is demand for Safaricom to avail an API for Mpesa, it is owned and controlled by Vodafone (UK)
- If you have an account at Consolidated bank of Kenya and others, you can use a mobile phone to transfer money from your bank account to your Mpesa account
- Fibre mirage?
(i) The cost of last mile connectivity in Kenya is still high e.g. one example cited was a quotation from a leading ISP in Kenya for $10,000 to extend the fibre just 300 metres
(ii) Even though fibre can make speeds more than 17X faster today, the ISP will only make gradual increments of 2X every few months to fool customers that they are always upgrading/improving
- There is no adequate consumer protection group/lobby in Kenya to agitate for better services. The communications commission of Kenya (CCK) regulator does not respond to consumers complaints
- Only Safaricom has a 3G license in Kenya (the cost is astronomical) and so far only deployed in Nairobi, Mombasa, Kisumu
- Safaricom has developed Mpesa bulk payment/transfer systems. Example given was to enable payments to farmers in Mt. Kenya region
- A great resource for mobiles in development is the CGAP site (World Bank)
- M-pesa heralds a shift from branch based banking to agent based banking with examples (at CGAP)
- Safaricom partnership with western union to enable transfers from UK to be sent to recipients mobile phones. Still being tested with safaricom employees, but will probably be as expensive as a regular western union transfer.

No SWAG from Safaricom

There will be no SWAG from Safaricom at their annual general meeting that will be held on August 19 - so the company boldly proclaimed in a media briefing on Wednesday.

Even while projecting that just 30,000 of their 830,000 shareholders to turn up, the company budgeted a total Kshs. 352 million (~$4.5 million for the event) which they cite as being too expensive. They even have compared the cost of the day’s events to be the equivalent to one month of all their leases, of 1 ½ months worth of administrative expenses – all channeled to a one day event!



Yet two things are clear:

1. Much of the burden is regulatory: They estimate it will cost Kshs. 240 million to print and circulate an annual report (Co-Op Bank, the most recent listed company has a 150 page report). Dividend will be distributed to shareholders, and they estimate that it would Kshs. 73 million to send these by EFT to a fraction of investors. Truth is most dividends and paid by cheque, very few by EFT.

2. SWAG generosity is not that expensive (but these are tough times): Kshs. 40 million for shirts, lunch, caps, and umbrellas is not much money for the company to spend, even if they don't provide transport to the venue (about 10 kilometers from town) . However these are cost-cutting times even at the largest companies. A few years ago, Nation Media Group (NMG) would hire buses to take their shareholders to their Nation AGM at their premises (beyond Jomo Kenyatta Airport) where they’d would have lunch and get some SWAG items. This year's event was at KICC in the middle of town (no transport costs) and shareholders only got copies of newspapers with their buffet lunch.

For Safaricom to take a harsh stance on SWAG is rather cold unless the directors and manager also adopt a similarly Spartan lifestyle e.g. no water for directors at the meeting and no breakfast /giveaways for media and institutional investors when they announce quarterly results. Still I expect a few thousand shareholders to turn up, not believing that there will be no SWAG

Hi Tech Cost Cutting: Safaricom is combating the high cost of annual general meetings and investor relations through technology

1. Annual reports will be downloaded from their website, which is probably the best in Kenya among NSE listed firms in terms of communicating with shareholders. It is updated constantly, even on the same day with CEO briefs to media and institutional investors.

2. Use M-Pesa to pay dividend. Odds are that most of their local 830,000 shareholders are also their (13 million +) customers; many will not have bought shares since the IPO – meaning their dividend cheques are perhaps just 20 shillings $0.25), so by employing M-pesa this will be a much cheaper channel than cutting and posting cheques for such small amounts.

The logistics of doing this are quire significant, it will involve partnering with the company registrar, perhaps the central depository settlement corporation (CDSC), and M-Pesa agents, to ensure each person gets their 10% dividend payment in the correct formula (a reversal will be a nightmare). Once this is done it will be an eye-opener for some of the other companies with large shareholder bases +50,000 including Kengen, KCB , Kenya Re , Mumias , Co-operative Bank and Kenya Airways who had a their loss-making year in a decade.

Other Development: The media release media release (PDF) also mentioned two recent developments at Safaricom:

1. Investor road show where they visited institutional and fund investors and talked in detail about the company in London (T Rowe Price, Genesis Investment, Charlemagne Capital, Marshall Wace, Renaissance Investment, Eton Park Capital, JP Morgan Chase, Aberdeen Asset, Henderson Global , ROBECO Group, Cyrte ), New York (EMS Capital, DWS Scudder, Morgan Stanley, Galleon Partners, McKinley Capital, Harding Loevner, Goodman), Boston (State Street, Wellington, Fortis ), Johannesburg (Stanlib, RMB, Visio) and Cape Town (Investec, Allan Gray , Coronation, Fairtree)

2. Their investment with Jamii Telecom which will include partnering in use of fibre in metro areas , and resale of excess capacity on TEAMS and Seacom, among others.

Read also ratio magazine Dont Come to Safaricom for Lunch post

Urgent need for Sub Cable

Whether it will be EASSy or TEAMS, the urgent need for East Africa to have a submarine cable will become apparent within a few years.

The 2006 merger of Intelsat and PanAmSat, creating the worlds' largest satellite provider, will have profound implications for Africa which is estimated to be 80% dependent on satellite communications. Higher costs can be expected from the giant company once existing agreements expire and ISP's will have no choice but to pass these own to consumers.

The government of Kenya broke away from other African countries (in EASSy) and has committed to the TEAMS project, budgeted at $100 million. It committed to pay $15 million this financial year and has contracted Standard Chartered bank to raise additional funding from ICT operators in the the private sector.