I will start with why people invest. At Berkshire investing is defined as the transfer to others of purchasing power now with the reasoned expectation of receiving more purchasing power in future. Remember, the shares you purchase today are parts of an underlying company that, in ten or twenty or fifty years’ time, will have produced an incredible amount. We are not throwing darts on at a board. We are investing in businesses with moving parts which we need to be cognizant of.
The riskiness of an investment is not measured by the movement of the stock price but rather by the probability of that investment causing its owner a loss of purchasing-power over his or her contemplated holding period.
With this in mind, let us put into perspective the qualities and perspectives that we find immensely attractive in Safaricom.
Management
Investors have reacted positively to the appointment of Peter Ndegwa as the new CEO with the stock rising from KES 26 to the current price of KES 30 since he joined the company on the 1st of April, 2020. I want to reiterate the importance of the board and top management in ensuring sustainability of the company from Warrant Buffet’s 2011 Shareholder’s letter. “The primary job of a Board of Directors is to see that the right people are running the business and to be sure that the next generation of leaders is identified and ready to take over tomorrow”.
Cashless transactions
According to the Kenyan National Bureau of statistics Economy Survey, 2020, total mobile money transfers grew by 9.1 per cent from KSh 3,984 billion in 2018 to KSh 4,346 billion in 2019. Communications Authority statistical report for the 3 months between October and December of 2019 showed that M-Pesa recorded the highest market share of 98.8 percent. This gives Safaricom the best opportunity of taking advantage of the explosion of cashless transactions during the COVID19 era, a trend that is likely to continue post COVID19.
Social distancing, remote learning and e-commerce
In the second half of its 2019/20 financial year that ended on 31st of March, 2020 Safaricom’s mobile data revenue grew by 21.1%. “Growth in mobile data was driven by increased smartphone penetration and usage and a 28.3% reduction in effective rate per MB” outgoing CEO Michael Joseph. This trend is likely gain momentum going forward.
Forbes has estimated e-Learning to climb to $325 Billion by 2025 and Kenya has not been left behind as many learning institutions pivot to online learning leading to an upsurge in mobile and fixed data consumption.
Who said you can’t teach old dog new tricks? Safaricom is now neck to neck with Zuku’s Wananchi Group on fixed data subscriptions.
Mobile Lending and Saving products
CBK 2019 quarter one, credit survey report recorded an increase in the demand for personal or household loans by 39%. Gross banking sector loans stood Ksh.2.58 trillion in March 2019. Safaricom in partnership with KCB and CBA continue to drive mobile lending and savings products such as Fuliza, KCB M-PESA and Mshwari.
The company is testing a unit trust product known as Mali. Wanting to save more money and spend less money is a top New Year resolution and many Kenyans want to save and invest part of their discretionary income to increase their future disposable income and purchasing power. Assets under management in unit trusts rose by 25% from 61bn to 76bn between December 2018 and the same time in 2019 as per the Capital Markets Authority Statistical reports.
Value chain play
According to the outgoing CEO Michael Joseph, Safaricom has ramped up its investment in IT capabilities, with an objective of mapping a monetization path in critical verticals such as agriculture, health, education and ecommerce. According to the Kenyan National Bureau 2020 Economic Survey, Agriculture sector for example, remained the dominant sector in Kenya in 2019, accounting for slightly over 30% of the GDP of Kenya.
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Robert Ochieng is CEO of Abojani Investments, A digital-first personal finance company. Email [email protected]
