Peter Ndegwa
Chief Executive Officer
Message from the CEO
“In a year in which Kenyans faced many challenges, a year marked by slowed economic growth, currency depreciation, rising global inflation, a slow-down in business activity due to the General Elections and the impact of the ongoing Russia-Ukraine war, and of course the severe drought, I am pleased that we have once again delivered a very solid set of results for our shareholders.” We experienced a slowdown in the first half of the year. Still, we saw a recovery in the second half, demonstrating the resilience of our business amidst challenging macroeconomic conditions. Despite the reduction in the Mobile Termination Rate (MTR) in Kenya, we achieved strong growth (refer to page 95 for more details on our operating environment).Another significant issue was the shrinkage in our customers’ disposable income due to elevated inflationary pressure and currency depreciation. However, our customers’ demand for value for money has remained central to our customer-centric efforts . In response, we reduced mobile data prices by thirty per cent and selected other services by up to fifty per cent.The rising energy cost, fuel and electricity, and the reduction in MTR for the industry were major concerns during the year.The reduction in MTR negatively impacted our top line, resulting in a loss of KShs 2 billion in interconnect revenues.
Areas of Growth
We are pleased with the growth of M-PESA, which contributed forty per cent to our business after experiencing a pre-election slowdown in the year. We will continue to drive growth in financial services and expand our credit offerings in business payments and insurance.Mobile data has also shown strong performance and will be a key driver of growth in the future. There is still untapped potential in fixed solutions for home and enterprise, indicating room for further growth.
Ethiopia
The award of mobile financial services licenses in Ethiopia is a significant milestone for us. Although our roll-out in Ethiopia faced initial security concerns, skills, and infrastructure obstacles, we are well-positioned to catch up and increase our momentum. While uncertainties remain in some parts of the country, particularly in Tigre, we are confident in delivering value as we grow the Ethiopian business. Ethiopia remains a key part of our strategy to accelerate new growth areas and reduce dependence on Kenya’s GSM and connectivity business.
Opportunities
Connectivity continues to present extensive opportunities, including voice usage and traditional payments. M-PESA has witnessed growth in its merchant network and new areas such as Pochi la Biashara, business transacting tills, and merchant credit facilities. M-PESA ARPU increased by 1.9%, and Mobile Data ARPU increased by 16%.We recognise M-PESA’s potential to expand credit services and are innovating in serving different customer segments, including youth, by introducing M-PESA GO.
Technology Partner of Choice for Government and Society
We fully support the government’s digitisation agenda with over 6,000 government services now digitally enabled on eCitizen. For society we saw: The Hustler Fund Phase 1 launched in November 2022, with accessible credit disbursed to 15.8 million customers The Women’s Enterprise Fund launched in March 2023 with 153 groups created within the first month The MyCounty App in support of government service digitisation 2.0 million bags of fertiliser distributed to 2.3 million farmers in 28 counties, to a transacted value of KShs 7.1 billion value, via M-PESA fertiliser distribution Moreover, through M-PESA and M-PESA Business, we see expanded financial and education services as well as in business credit, with financial inclusion also representing a significant opportunity. In addition, with only about a quarter of homes connected, we are at an early growth stage. I was honoured to lead the National Steering Committee on Drought, which established the National Drought Mitigation Appeal Fund to alleviate hunger and deprivation in 20 vulnerable counties and affected wards.
Performance Against Strategy
Our long-term strategy remains to accomplish our transformation from a telco to become a technology company. We thus remained focused during the year on accelerating new growth areas by converting opportunities to meet changing and expanding customer needs and societal challenges. In implementing our strategy, it is gratifying to be able to say that our performance during the year, evident in our good results, has underscored and delivered on the value inherent in our overarching strategic goal. In particular, for our investors, we delivered on four main elements: The successful launch of the Ethiopian business and the award of the financial services license in that country, providing security for the business there The improvement in performance in H2, after the uncertainties related to the elections and other macro-economic conditions in H1 Double-digit growth in mobile data realised in the second half of the year as well as the growth in other areas such as our fixed and enterprise business Performance delivered in line with guidance It is important to note, however, that the Company will remain in an investment phase over the coming three or four years, supporting the network roll-out and scaling operations in Ethiopia. We are still on course to see Safaricom Ethiopia break even four years from the launch of operations there. This will therefore affect our Group reported earnings, but will be a significant driver of growth into the future, although it may have an impact on dividends in the medium term.
Stakeholders
During the year we remained committed to, and continued to affirm our relationships with, our diverse stakeholders. We strenuously strove to maintain our engagement with them, and to take into account the issues of concern from them. Externally, with government, we resonate strongly with what is of material interest to the country and the region, and our regular and focused interactions remained both productive and positive. We maintain strong relationships with our regulators, the Central Bank of Kenya (CBK) and the Communications Authority of Kenya (CA), despite, and because of significant market player status, and I believe it is well understood that we do not in any way misuse our position. Our two Foundations remain a source of great pride and effectiveness for us. The benefits to Kenyan communities that we are able to accomplish through the foundations, and their ongoing role in providing inclusivity, assistance and support, continued to be a powerful reinforcement of our brand and reputation. This is borne out by net promotor scores (NPRs) of brand consideration in the 80s, and brand love in the 60s. Nonetheless, I believe that there is room to improve on the perception of our products, which are still widely viewed as premium.Our suppliers, dealers and agents, and of course our customers all of which groupings received unstinting support from the Company during the pandemic, remained central to our social and relationship capital during the year. Our bonds with all these stakeholders were strengthened through proactive and considered engagement with them. Even as we are a little past the halfway point of attaining the goals of our 2025 strategy, we are in the process, together with the Board, of crafting our 2030 vision. Thus, in the short term, we will be focusing on scaling solutions in order to bring our overarching technology- company vision to reality. In the short to medium term, we will be aiming to increase 4G penetration by fifty percent annually. This will include partnering with open market to drive penetration of 4G devices, accelerating our device financing programme and various other productive partnerships. We now have well-established Agile ways of working that are both customer- and digital-first, actively addressing needs rather than merely providing product. This platform will allow us in the medium term to double the 276k homes we have connected, and keep pushing the boundaries of innovation such as 5G. Wealth and insurance will increase in importance as new growth areas, and on the technology side, the internet of things (IoT). In this, Cloud will become a critical enabler. Also in the medium to long term, we will be seeking to partner with government in its digitisation agenda, and to democratise both internet and fintech solutions. An important aim is to lead the Kenyan industry in its digital talent programme and the use of big data analytics in anchoring the way we think about the business. In Ethiopia we will ensure that we deliver a scalable network with customer numbers that will deliver on the high-investment period in which the business in that country is currently operating.
Acknowledgements
I would like to thank the Board for its continued wise, considered and expert oversight. Its clear and transparent effectiveness is central to our success. In particular, I would like to thank John Mgumi for his exceptional leadership as Chairman, and to wish his successor Adil Khawaja well in his role as our new Chairman. I would also like to welcome our new Board members, Ory Okolloh and Karen Kandie, as they join the leadership team, and assure them of management’s unstinting support. My sincere thanks too, go to the Board members who are leaving, Prof Bitange Ndemo, Ms. Linda Muriuki, Christopher Kirigua, Eng. Stanley Kamau and Sitholizwe Mdlalose for the committed and skilled guidance of management that they have always provided. I would like to thank the Government of Kenya (GoK), our regulators and all our stakeholders for their continued support, input and insights. In particular, I would like to express my gratitude to our customers for their loyalty to our brand, products and services. It is for them that the business ultimately exists, and their trust in our brand and offerings are central to our success. My grateful thanks go also to our employees, without whose commitment, loyalty and diligence we could not have achieved the excellent results that we have. We look forward to continuing to work with all these key people, bodies and institutions as we go forward together into the future.
Peter Ndegwa
Afisa Mkuu Mtendaji
Ujumbe Kutoka Kwa Afisa Mkuu Mtendaji
“Katika mwaka ambao Wakenya walikabiliwa na changamoto nyingi, mwaka ulioshuhudia kudorora kwa uchumi, kushuka kwa thamani ya shilingi, kupanda kwa mfumko wa bei duniani, kupungua kwa shughuli za kibiashara kutokana na Uchaguzi Mkuu na madhara ya vita vinavyoendelea vya Russia na Ukraine, na bila shaka ukame uliokithiri, nina furaha kwamba kwa mara nyingine tumewasilisha matokeo mazuri ya kifedha kwa wenyehisa wetu.” Tulishuhudia kudorora kwa biashara katika nusu ya kwanza ya mwaka. Lakini biashara iliimarika nusu ya pili ya mwaka, na kuashiria ukakamavu wa biashara yetu katika mazingira yenye changamoto za kiuchumi. Licha ya kupunguzwa kwa ada ya kupigwa kwa simu kutoka mtandao hadi mwingine (MTR) nchini Kenya, tulishuhudia ukuaji mkubwa ). Suala jingine lilikuwa ni kupunguzwa kwa mapato ya kutumiwa kwa hiari na wateja wetu kutokana na mfumko wa bei za bidhaa na kushuka kwa thamani ya shilingi. Hata hivyo, hitaji la wateja kupata thamani kwa pesa wanazotumia limesalia kuwa nguzo kuu katika juhudi zetu za kuwajali zaidi wateja (soma ukurasa 30 kwa maelezo zaidi kuhusu kujali wateja zaidi). Kuhusiana na hili, tulipunguza bei ya data kwenye simu kwa asilimia thelathini na bei ya huduma zingine mbalimbali kwa hadi asilimia tano. Kuongezeka kwa bei ya kawi, mafuta na umeme, na kupunguzwa kwa MTR yalikuwa mambo makuu yaliyozua wasiwasi zaidi kwa sekta hii katika mwaka huo. Kupunguzwa kwa MTR kulipunguza mapato yetu, na kuchangia hasara ya KShs 2 bilioni katika mapato ya kuunganisha wateja na mitandao mingine.
Maeneo Ya Ukuaji
Tumefurahishwa na ukuaji wa M-PESA, ambayo ilichangia asilimia arobaini kwa biashara yetu baada ya kuathiriwa kidogo kipindi cha kabla ya uchaguzi robo ya kwanza yam waka. Tutaendelea kuchochea ukuaji katika huduma za kifedha na kupanua huduma zetu za utoaji mikopo katika malipo kwenye biashara na kwenye bima. Huduma ya data kwenye simu pia imeandikisha matokeo mazuri na itakuwa kiungo muhimu cha kuchochea ukuaji siku za usoni. Bado kuna uwezo ambao haujatumiwa vyema katika mtandao wa kufikishwa manyumbani na kwenye biashara kupitia nyaya, na hii ni ishara kwamba kuna nafasi ya ukuaji zaidi.
Ethiopia
Kukabidhiwa kwa leseni ya kutoa huduma za kifedha kupitia simu nchini Ethiopia ni hatua kubwa sana kwetu. Ingawa uzinduzi wetu nchini Ethiopia mwanzoni uliathiriwa na changamoto za kiusalama, ujuzi, na miundombinu, sasa tupo katika nafasi nzuri ya kuwafikia wengine na kuongeza kasi yetu. Ingawa bado kuna hali ya kutotabirika katika baadhi ya maeneo ya nchi hiyo, hasa Tigre, tuna imani kwamba tutaweza kutoa thamani tunapoendelea kuikuza biashara yetu Ethiopia. Ethiopia bado ni sehemu muhimu ya mkakati wetu wa kuchochea ukuaji katika maeneo mapya na kupunguza utegemezi katika biashara ya GSM na mtandao nchini Kenya.
Fursa
Bado kuna fursa kubwa katika kuwaunganisha watu, ikiwemo matumizi ya sauti na malipo ya kawaida. M-PESA imeshuhudia ukuaji wa mtandao wa wanabiashara wanaoitumia na maeneo mapya kama vile Pochi la Biashara, till za kufanyia biashara, na mikopo kwa wafanyabiashara. Kipimo cha mapato kutoka kwa kila mtumiaji (ARPU) kwa M-PESA kiliongezeka kwa 1.9%, na kwa data kwa njia ya simu kikaongezeka kwa 16%. Tunatambua uwezo wa M-PESA wa kupanua huduma za mikopo na tunafanya uvumbuzi katika kuhudumia vyema makundi maalum ya wateja, wakiwemo vijana, kwa kuanzisha M-PESA GO.
Mshirika Bora Wa Kiteknolojia Wa Serikali Na Jamii
Tunaunga mkono kikamilifu ajenda ya serikali ya kukumbatia matumizi ya dijitali katika huduma zake, ambapo kufikia sasa huduma 6,000 za serikali zinapatikana kidijitali katika eCitizen. Kwa jamii, tuliona: Awamu ya kwanza ya Hazina ya Hustler 1 iliyozinduliwa Novemba 2022, ambapo mikopo ya bei nafuu imetolewa kwa wateja 15.8 milioni Hazina ya Wanawake Wajasiriamali (WEF) ilizinduliwa Machi 2023 ambapo makundi 153 yaliundwa mwezi wake wa kwanza Kuna pia programu tumishi ya MyCounty App ya kusaidia kufanywa dijitali kwa huduma za serikali Mifuko 2.0 milioni ya mbolea ilisambazwa kwa wakulima2.3 milioni katika kaunti 28, ambapo jumla ya KShs 7.1 bilioni zilitumika, kupitia M-PESA kwa ajili ya kusambazwa kwa mbolea Pia, kupitia M-PESA na Biashara ya M-PESA, tumeshuhudia kupanuliwa kwa huduma za kifedha na kielimu Pamoja na mikopo kwa biashara. Kujumuishwa kwa watu zaidi kwenye mfumo wa kifedha kunatoa pia fursa kubwa. Kadhalika, ikizingatiwa kwamba ni nyumba robo moja tu ambazo zimeunganishwa kwenye mtandao, tupo katika hatua ya awali sana ya ukuaji .Nilifanikiwa kuongoza Kamati Elekezi ya Kitaifa kuhusu Ukame, iliyoanzishwa chini ya Hazina ya Taifa ya Msaada wa Kukabiliana na Ukame, kupunguza makali ya njaa na ukame katika kaunti 20 zilizoathirika zaidi na wadi husika.
Matokeo Na Mkakati
Mkakati wetu wa kipindi kirefu umesalia kutimiza mabadiliko yetu kutoka kampuni ya mawasiliano ya simu na kuwa kampuni ya kiteknolojia. Kwa hivyo, katika mwaka huo tuliendelea kuangazia kuongeza kasi maeneo mapya ya ukuaji kwa kubadilisha fursa kuwa faida kwa kutimiza mahitaji ya wateja yanayoendelea kubadilika na kupanuka, pamoja na changamoto zinazoikabili jamii. Katika kutekeleza mkakati wetu, inaridhisha kuweza kusema kuwa utendaji kazi wetu katika mwaka huo, kama ilivyodhihirishwa kwenye matokeo yetu mazuri, unasisitiza na kutoa thamani kuendana na lengo letu kuu la kimkakati.Hasa, kwa wawekezaji wetu, tulitimiza katika mambo manne makuu: Kufanikiwa kwa uzinduzi wa biashara yetu za Ethiopia na kukabidhiwa leseni ya huduma za kifedha kwa njia ya simu nchini humo, hivyo kutoa usalama kwa biashara yetu huko Kuimarika kwa matokeo ya nusu ya pili ya mwaka, baada ya wasiwasi uliohusiana na uchaguzi na changamoto nyingine za kiuchumi kuathiri nusu ya kwanza ya mwaka Ukuaji wetu wa zaidi ya asilimia kumi katika data kwa njia ya simu ambao ulipatikana nusu ya pili ya mwaka, pamoja na ukuaji katika maeneo mengine yakiwemo huduma ya intaneti ya kutolewa kupitia nyaya kwa nyumba na biashara Matokeo mazuri yaliyopatikana yaliendana na ushauri uliotolewa Ni muhimu kutambua, hata hivyo, kwamba kampuni itasalia katika awamu ya uwekezaji kwa miaka mitatu au minne ijayo, ikisaidia uzinduzi wa mtandao na kupanuliwa kwa shughuli zetu Ethiopia. Bado tupo kwenye njia nzuri ya kushuhudia biashara yetu ya Ethiopia ikiandikisha faida miaka minne baada ya kuzinduliwa kwa shughuli zetu huko. Kwa hivyo, hili litaathiri matokeo ya Kundi, lakini ni jambo litakalokuwa chanzo kikubwa cha kusukuma ukuaji katika siku za usoni, hata kama huenda likaathiri mgawo wa faida katika kipindi cha wastani.
Wadau
Katika mwaka huo, tulisalia kujitolea kwa, na tuliendelea kuheshimu uhusiano wetu na wadau wa aina mbalimbali. Tulijizatiti kuendeleza ushirikiano wetu nao na kutilia maanani masuala ya umuhimu kwao. Nje ya nchi, pamoja na serikali, huwa tunaangazia sana mambo ya umuhimu kwa taifa letu na kanda, na mashauriano yetu ya mara kwa mara yamesalia kuwa mazuri na ya kuzaa matunda. Tunadumisha uhusiano thabiti na wasimamizi wa sekta yetu, Benki Kuu ya Kenya (CBK) na Mamlaka ya Mawasiliano ya Kenya (CA), licha ya, na kwa sababu ya, kuwa mhusika mkuu sokoni. Na ninaamini kwamba hili linaeleweka vyema kwamba hatuna nia hata kidogo ya kutumia vibaya nafasi yetu. Nyakfu zetu mbili zimeendelea kuwa chanzo cha fahari kubwa sana kwetu. Manufaa kwa jamii Kenya ambayo tunaweza kuyatoa kupitia nyakfu hizo na mchango wazo unaoendelea wa kujumuisha wote, msaada na usaidizi, ni mambo ambayo yameendelea kuongeza na kuimarisha sifa za nembo yetu. Hii inadhihirishwa na kipimo cha kuridhishwa kwa wateja (NPS) ambapo kwa kuzingatiwa kwa nembo ni zaidi ya 80 na kupendwa kwa nembo ni zaidi ya 60. Hata hivyo, ninaamini bado kuna nafasi ya kuboresha zaidi hasa katika mtazamo na hisia kuhusu bidhaa zetu, ambazo bado zinatazamwa na wengine kama za maana na za thamani. Wanaosambaza bidhaa zetu, mawakala na maajenti, na pia wateja wetu ambao wote walipokea usaidizi wetu wakati wa janga, wamesalia kuwa muhimu sana kijamii na katika uhusiano wetu nao katika mwaka huo. Mshikamano wetu na wadau hawa wote ulitiwa nguvu kupitia hatua zetu na kuhusiana nao kwa njia ya maana. Hata ingawa tumepita kiasi nusu ya safari yetu ya kutekeleza malengo yetu ya mkakati wa 2025, tumo kwenye shughuli ya, pamoja na Bodi, kuandaa ruwaza ya 2030. Kwa hivyo, katika kipindi kifupi, tutakuwa tunaangazia kupanua na kuboresha huduma zetu ili kuifanya ndoto yetu ya kuwa kampuni ya kiteknolojia kutimia. Katika kipindi kifupi hadi cha wastani, tutalenga kuongeza uwepo wetu kuwa hadi maeneo 1,000, na pia kuongeza upatikanaji wa mtandao wa 4G kwa asilimia hamsini kila mwaka. Tunajumuisha pia uzalishaji na uunganishaji pamoja wa sehemu kuunda vifaa mbalimbali ndani ya nchi na ufadhili wa vifaa na ushirikiano wa kuzaa matunda.Kwa sasa tumekoleza mtindo wa kufanya kazi kwa Wepesi ambao unazingatia mteja kwanza na dijitali kwanza. Tunaangazia mahitaji badala ya kutoa bidhaa tu. Jukwaa hili litatuwezesha, katika kipindi cha wastani, kuhakikisha tunaongeza maradufu nyumba 250,000 ambazo kufikia sasa tumeunganisha katika mtandao wa intaneti, na pia kuendelea kutumia uvumbuzi kama vile 5G. Mali na bima vitaongeza umuhimu wake kama maeneo mapya ya ukuaji, na upande wa teknolojia, matumizi ya teknolojia ya intaneti katika kila kitu (IoT). Katika hili, teknolojia ya Cloud itakuwa kiwezeshaji muhimu. Pia katika kipindi cha wastani Kwenda kipindi kirefu, tutazingatia kushirikiana na serikali katika ajenda yake ya kuweka huduma zake katika dijitali, na pia kutumia demokrasia katika mtandao wa intaneti na huduma za kifedha zinazotolewa kupitia teknolojia. Lengo muhimu ni kuongoza Kenya katika mpango wake wa vipaji vya kidijitali na matumizi ya takwimu na data kuu katika kuwa msingi wa jinsi tunavyoifikiria na kuiendesha biashara yetu. Nchini Ethiopia tutahakikisha kwamba tunatoa mtandao thabiti na pana wenye idadi ya kutosha ya wateja ambao utazaa matunda ya kipindi kikubwa cha uwekezaji ambacho kwa sasa biashara yetu nchini humo inakipitia.
Shukrani
Ningependa kuishukuru Bodi kwa ushauri na uongozi wake wa busara. Utekelezaji wake wa majukumu ipasavyo kwa njia ambayo ni wazi umekuwa nguzo ya ufanisi wetu. Hasa, ningependa kumshukuru John Ngumi kwa uongozi wake wa kipekee kama Mwenyekiti, na namtakia mrithi wake Adil Khawaja kila la heri katika wadhifa wake kama Mwenyekiti wetu mpya. Ningependa pia kuwakaribisha wanachama wetu wapya kwenye Bodi, Ory Okolloh na Karen Kandie, wanapojiunga na kundi la uongozi, na nawahakikishia uungwaji mkono kutoka kwa wasimamizi. Shukrani zangu za dhati ziwaendee wanachama wa Bodi wanaoondoka, Prof Bitange Ndemo, Bi Linda Muriuki, Christopher Kirigua, Eng. Stanley Kamau na Sitholizwe Mdlalose, kwa kujitolea kwao na ushauri na uelekezaji wa hekima ambao waliutoa kila wakati kwa usimamizi. Ningependa kuishukuru Serikali ya Kenya (GoK), mamlaka zinazotusimamia na wadau wetu wote kwa uungaji mkono wao, mchango wao na ushauri wao. Kwa njia ya kipekee, ningependa kutoa shukrani zangu kwa wateja wetu kwa uaminifu wao kwa nembo yetu pamoja na bidhaa na huduma zetu. Ni kwa sababu yao biashara yetu ingali ipo, na imani yao kwenye nembo yetu na bidhaa na huduma zetu ndiyo nguzo ya ufanisi wetu. Shukrani zangu pia ziwaendeee wafanyakazi wetu ambao bila kujitolea kwao, uaminifu wao na bidii kazini, hatungeandikisha matokeo mazuri tuliyoyapata. Tunatumainia kuendelea kufanya kazi na watu hawa wote muhimu, mashirika na asasi, tunaposonga mbele kwa pamoja katika siku za usoni.