What Safaricom’s accounts say about Kenya’s economic policy

Saturday May 21 2016

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In the last blog post, I argued about whether the claim that Kenya has made great strides in financial inclusion stands against close scrutiny.

I concluded that viewed against the standard roles of a financial system, the celebration of Kenya as a haven of financial inclusion is premature. Then a reader contacted me privately asking what my views were on M-Pesa specifically, and the results of Kenya’s largest corporation and biggest taxpayer.

I thought that the best way to answer that question was not to read glib press statements from public and private sector offices, but to review the numbers for what they prove or don’t prove.

What I hoped to see are what the numbers reveal about the economic environment in which the firm operates, as opposed to the firm’s internal dynamics.

Since Safaricom's financial results for the year ending in March 2016 were published, the press has been filled with analyses about the strength of the firm and its sources of revenue.

What is missing from these analyses is what the numbers reveal about Kenya’s economy. So here are my thoughts from a few days’ look at the key financial statements found here.

What is most impressive about Safaricom is that the firm is not only Kenya’s but also East Africa’s leading revenue earner among publicly listed corporations.


With total revenue recorded for the year at Sh195.7 billion, this represents an average take of Sh536 million per day, not a small number. Collecting and accounting for revenue are critical to this institution, and the results are testimony to the fact that some people take this role seriously.

Contrast this with the public sector, whose revenue collection per day is about nine times larger but not as tightly managed, given the perennial findings that billions of shillings remaining unaccounted for at the end of every financial year.

Here is the the most revealing set of numbers gleaned from the report and what they confirm regarding the structure and size of Kenya’s economy.

Having deducted operations costs and depreciation of assets, Safaricom recorded Sh55.76 billion as profit, pending taxation. Its total contribution to all government revenue for the year of the report is Sh17.66 billion, or 9 per cent of this firm’s overall receipts.

Considered against total government revenue of Sh1.295 trillion in the present financial year, this result is just mind-boggling. It implies that Kenya would need to nurture only 73 corporations of the same size to fully satisfy all revenue requirements by the government of Kenya for the financial year ending in June 2016.


To illustrate this differently, if Kenya had six dozen firms the equivalent of Safaricom, government could live with the income taxes from them without levying any other taxes.

This finding is profound because it suggests that either Safaricom is a very large corporation relative to its peers in Kenya or that the country has a deficit of productive firms.

My contention is that it is both, because that kind of firm dominance suggests that a firm is doing well but also that government corporate income is disproportionately borne, by a few large firms.

Against the estimate that there are more than 50,000 registered corporations in Kenya, Safaricom's fecundity as a source of taxes suggests that most of the other corporations in the registrar’s list are barely alive, meaning that Safaricom and its corporate peers are outliers in an environment that makes the growth of firms extremely difficult.   

Growing private firms is good development policy, not because it transmits revenues to government at a low cost of collection but primarily because it is a direct channel for employment. Safaricom's business is highly capital intensive and requires huge investment in special equipment and high-calibre professionals.

Given the firm employs around 4,000 people, it would not be possible to build these firms quickly enough to create mass employment, meaning mass unemployment is likely to endure.

In short, this company’s success suggests that successful corporations in Kenya become that despite, and not because of, good private sector development policy.

Kwame Owino is the chief executive officer of the Institute of Economic Affairs (IEA-Kenya), a public policy think tank based in Nairobi. Twitter: @IEAKwame