While sub-Saharan Africa may be the world’s second fastest growing region, economic gains remain centred around the region's elite. But Robert Collymore, chief executive of Kenya-based telecommunications firm Safaricom, believes mobile phones will be central to the redistribution of wealth to the region’s poorest people.
As many as 46% of sub-Saharan Africa’s population still lives in poverty, according to the World Bank, but Mr Collymore maintains that telecommunications – which have been at the heart of Africa’s growth – will be critical in narrowing the region’s wealth divide.
Firms such as Safaricom will play a key role as service providers. Mobile phone uptake in Africa has been the fastest in the world. Between 2006 and 2008, mobile subscription rates grew at a compound annual growth rate of 42% before slowing to 21% between 2009 and 2011, according to estimates from professional services firm Deloitte.
Safaricom has been one of the principle beneficiaries of this growth. Mr Collymore says the firm’s innovative approach to extending its mobile phone offerings beyond traditional voice-based services to deliver affordable services to Kenya’s poorer population is enabling a larger cohort of Africans to join the middle classes. Safaricom’s flagship M-Pesa, Africa’s first money transfer and micro financing service, is one example.
Mr Collymore says Safaricom’s focus on innovating to provide a range of affordable services on a mobile phone, including healthcare and insurance, explains the firm’s success. “We do not see ourselves as just a mobile operator because we are not just selling minutes and megabytes of data,” says Mr Collymore. “We are selling financial services and we will soon start selling medical services.”
Even if Safaricom is firmly rooted in Kenya, its innovations have spread across Africa. Mr Collymore says this is due to the firm’s focus on solving challenges that are prevalent across the region in an affordable and scalable way. He highlights Safaricom’s new mobile phone-based micro-insurance product, which is targeted at workers in the informal sector who cannot afford mainstream insurance policies. He says the product will encourage uptake in a country where just 4% of Kenyans have insurance policies.
“We tackle the market at a micro level,” he says. “Our new micro-insurance product means people can pay as little as 10 pence, in UK currency terms, to build up their insurance premium as they go. Getting insurance in Kenya is too expensive and with a large percentage of the population working in the informal sector, where they cannot predict their revenues over a long-term, they need a product just like this.”
Mr Collymore is confident telecommunications will remain one of Africa’s main growth opportunities, but he says competition will intensify. With consolidation in the industry, he warns foreign investors to keep an eye on the changing composition of Africa’s telecommunications sector. But for Safaricom, he believes the firm’s proactive approach to solving daily needs will enable it to increase its revenue base.
“My outlook on the telecommunications industry is vibrant,” says Mr Collymore. “We see a lot of room for growth this year. However, we are seeing more consolidation. A lot of markets are moving down from four or five telecommunications firms to three firms. Yet we are in a unique position in Kenya. We have a 7% consumer share and our half-year results revealed [a rise in] revenues in the region of 11%, so we will maintain our dominant position. Beyond this we have several innovations in the pipeline, which will serve as a springboard for the telecommunications industry as a whole beyond Kenya.”