Tales of innovation and adaptation; the Safaricom, M-Pesa example


By Juanita Sallah

“Africa will be globalised very quickly, and the companies that are operating on the continent right now better take global benchmarks and global standards [realising] that there is only one world definition for excellence and head for it, or else what we call the African standards and so on will kill us.”

Yaw Nsarkoh spoke this approximately ten years ago, and they sounded like hastily dispatched soldiers.
During the Africa Leadership Dialogues in Nairobi, Nsarkoh—then the Managing Director of Unilever—East and Southern Africa—gave his opinion on the continent’s development progress during an ALD Coca-Cola Panel discussion moderated by Kenya’s Julie Gichuru.
Regardless of our current or past issues, Nsarkoh’s thoughts during that panel discussion pointed everyone listening in the direction of Africa’s opportunity, which is becoming more and more evident as the economies of North America and Europe struggle to grow and start to retreat. “The underdevelopment of Africa led us to believe that we could live in some form of autarchy inside the global reality of standards and economic benchmarks,” he said in that panel discussion, and he was right, technically. You see, to help us get through our hardships as we make our way around the bottom of the global economic scale, we devised this falsehood. It was referred to as the “African standards,” respected and adhered to throughout the continent, and it functioned as a fantastic stand-in for our shortcomings.

The tale of the ‘African Standards’
Unofficially, African standards merely permitted a degree of latitude in the calibre of goods and services supplied to the continent’s markets without taking into account international standards for those same goods and services. When our people went to trade with European and Asian businesses, it became obvious to them that the African market would not always choose premium quality. As a result, these businesses felt comfortable asking our traders whether they were expected to meet international standards or if they should stick to African standards. Additionally, we felt at ease paying them to deliver services that were lacking in quality, make inferior products, and tamper with our procedures since we knew that the Africans had low standards.

The African Organisation for Standardisation (ARSO) was founded in 1977 with the goal of developing and harmonising standards for a range of goods, services, and procedures throughout the continent. Their top three priorities were:

1. Lower trade restrictions both internationally and inside Africa.

2. Boost African goods and services’ competitiveness in the international market.

3. Boost consumer protection by making sure that goods fulfil quality and safety requirements.

Has the ARSO been able to fulfil its mission at any point, or are they still trying?

Whenever African standards are brought up with an emphasis on quality and consumer protection, it seems as though a clown has suddenly entered the room and is threatening to arrest criminals, even though the clown is obviously powerless to punish them. The joke’s on the clown.

On the panel, where Nsarkoh discussed his reservations about the continent’s lack of seriousness to attain excellence on a global scale, were three additional CEOs from businesses that at the time had the biggest market influence in East Africa, some of which still have huge chunks of the pie even now. They were Titus Naikuni, the Group Managing Director and Chief Executive of Kenya Airways at the time (he has moved on to other pursuits since), Joseph Ogutu, the Director of Strategy & Innovation at Safaricom at the time (he recently retired after serving the Telco giant for 17 years), and Ramamurthy Thiagarajan, the then Regional Director, Strategy & Operations at Nakumatt Holdings Ltd., a company now known as a fallen elephant.
Let’s quickly review the internal actions (not so much global benchmarking criteria in this article) that these companies met while operating in their initial markets and the hurdles they overcame to sustain their market supremacy long after they started venturing out of their original markets.

For example, what measures did Unilever take to guarantee its continued relevance in the African economy? How did Kenya Airways rise to become the company with the best employment record, even though, in recent times, they have struggled to turn a significant profit? How in the world could Nakumatt fail when, at a time in history, they were expanding beautifully, like wild fires?

Together, representatives from the four companies sat on that stage and provided insightful responses when Julie Gichuru shared their views on business and the opportunities of the African continent.
Ten years later, I would write about the companies that the panellists worked for in this two-part series because, at the time, they greatly inspired the aspirations that the younger me was nurturing for our continent.

The tale of disruptive innovation and adaptability at Safaricom
M-Pesa is one of the top mobile money services in Africa, offering customers financial and payment services even in the absence of a bank account.
With just a subscription, M-Pesa was established in 2007 to help Kenyans with no access to banking services. Since then, it has expanded to six additional African nations. Except for requiring users to have a bank account, the programme functions similarly to other well-known payment apps like PayPal.
Concurrent with M-Pesa’s development, American telecoms were investigating opportunities in Africa but decided to hold off since they didn’t think there was anything significant to pursue.

The innovative product at first was a sticky nest item. “We never saw it at that time as a service that could really be a big earner,”  Ogutu told Gichuru.
They considered finding a solution for the unbanked community of people around them as a corporate social responsibility approach. They must have thought it would bring in some money, even though they weren’t sure how much or that it would be marginal at first. There was a need that only a person in touch with the society in which the firm operated could identify—a need that foreign investors who were exploring the opportunities in the Kenyan telecommunications market at the time were unable to recognise. At the corporate strategy level, this is known as integrated thinking in technical terms.

The management of an organisation that employs integrated thinking looks beyond financial success and examines the demands and interests of all stakeholders, including customers, suppliers, employees, and the environment, in order to promote behaviours that support a company’s long-term sustainability. Integrated reporting, in which businesses present a thorough picture of their performance, including financial and non-financial aspects of their firm, is frequently the result of integrated thinking. This is one of my favourite subjects as the secretary, serving on the board of the Ghana Association for Integrated Thinking and Reporting (GAITR), an organisation that is presently collaborating with the Institute of Chartered Accountants to adopt and promote the IFRS global accounting and sustainability disclosure standards in Ghana.

So, Safaricom made a move with the launch of M-Pesa. Maybe they thought of the hawker, who was scared to create a bank account because of all the procedures involved, and thought, Because she has a phone, let’s figure out a way to provide her with a location to keep her money safe from pickpockets and robbers.

Whether or not it was a clever idea that was borrowed without credit to the original creators, as some like to claim when the M-Pesa narrative is told, it was nevertheless a smart notion. According to the company’s prediction, they would have approximately 500,000 clients by the end of that year. One million people had signed up for the M-Pesa programme by the end of the year after they had to reevaluate their objectives three months after the product’s introduction. As he discussed this, Ogutu exuded such pride. “Since then, the programme has been used by over 20 million users,” he said.
Since then, the continent has seen similar amazing success stories, with MTN and other telcos and fintech companies making substantial contributions to the economies within which they served as a result of that mobile money innovation.
With a significant market share in Eastern and Southern Africa, the service is still operational and remains Safaricom’s most profitable service.

Safaricom’s revenue from M-Pesa since its introduction has increased significantly to over 885 million U.S. dollars in the fiscal year that ended on March 31, 2022, according to Statista, a Germany-based global data and business intelligence platform.

See the progress report in the graph below:

Safaricom made a number of critical decisions that helped ensure M-Pesa’s long-term success. Here are five of them:
Agent Network: M-Pesa was able to develop into a helpful service that was accessible even in remote areas by building a substantial agent network. As a result, people found it easier to use, withdraw, and deposit mobile money. We witness this as a model used by MTN Mobile Money as well.

Consumer Security: Consumer security is a top priority for Safaricom, which prioritises consumer trust by creating a secure platform with PIN protection and transaction verification. This trust was necessary for widespread adoption, especially in a market where traditional banking was not easily accessible.
Constant innovation: M-Pesa provided services beyond simple money transfers. Safaricom added features like bill payment, product purchasing, and savings options. M-Pesa gained traction as a one-stop shop for various financial needs as a result.

Partnerships: By collaborating with banks and other businesses, M-Pesa was able to connect with the pre-existing financial systems. It consequently gained greater adaptability and value for the Kenyan economy.

Put the Customer First: Safaricom prides itself on giving the user experience top priority. They kept M-Pesa current and user-friendly by consistently coming up with new features and incorporating requests from users.

These are only a few of the ways Safaricom contributed to the long-lasting success of M-Pesa, an invention that transformed Kenya’s banking industry and, years later, that of the rest of the African nations that adapted this innovation and are making it work.

Today, the financial technology industry is one of Africa’s top five industries with the greatest prospects and opportunities.
The M-Pesa story is a truly inspiring one. One that shows organisations on the continent have the ability to stretch beyond the comfort their markets provide, dream, and see possibilities where there are no visible opportunities.

Written by Juanita Sallah is a writer with extensive training in corporate governance, management consulting, administration, and media/communications.

She holds an MBA in Corporate Governance, serves as the secretary of the Ghana Association for Integrated Thinking and Reporting Council, and is a member of the Institute of Directors (MIoD),a Chartered Management Consultant (CMC), and Chartered Professional Administrator ChPA.
She is currently a partner with PauseRest Consultancy, a Total Quality Management practice

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