THE TRUE VALUE WE HAVE CREATED

We assess the signifi cant indirect value contribution we make to the economy, society and environment in Kenya using the KPMG “True Value” methodology. When monetised, the net value of the most material social, environmental and economic impacts of the company, both positive and negative, gives an indication of the total value that Safaricom creates for the people of Kenya. The following “True Earnings” bridge shows that the total value we created for Kenyan society in FY18 was KES 543 billion, 12 per cent greater than in FY17 and around 9.8 times greater than the fi nancial profi t the company made in the same year. This ratio is slightly smaller than the 10.03 ratio of FY17. This can be ascribed to the growth in company profits in the last financial year, which changed by 14 percent.

The True Value assessment calculates that Safaricom sustained over 171,369 direct and indirect jobs during the year and, if the wider effects on the economy are included, this number increases to over 897,372 jobs.

Definitions

True Value: A three-step methodology that enables companies to (i) assess their ‘true’ earnings including externalities, (ii) understand future earnings at risk and (iii) develop business cases that create both corporate and societal value.

True Earnings: The first step of the True Value methodology, which quantifies and monetizes the material externalities of a company.

Total Economic Value: The nature and magnitude of the contribution to the Kenyan economy made by Safaricom.

Induced economic impact: Operational and capital expenditure by Safaricom will create additional employment and also benefit the employees of suppliers affected. A share of the additional income generated in this way will be spent on the consumption of goods and services, which, through linkages and multiplier effects, will benefit the broader economy by stimulating additional demand for the products and services produced within that economy. This collective impact is referred to as “induced economic impact”.

THE FY18 TRUE EARNINGS BRIDGE

The economic impact made through the operations of Safaricom is the greatest contributor to the value created and has grown (7 per cent) since FY17. The value created through capital expenditure also increased and was 11 per cent higher in FY18, largely as a result of the investments in network infrastructure over the period.

All financial information was derived from the 2018 annual financial report, including the taxes paid by Safaricom and the actual direct employment. Both the capital expenditure, as well as the operational expenditure were run through the Kenyan national economic impact assessment model. The model was set up to accept the economic structure of the communication industry as is contained in the Kenyan Social Accounting Matrix (SAM).

The social value of M-PESA remains a signifi cant creator of value for Kenyan society, increasing by 20 per cent in the last fi nancial year. The major drivers for this growth have been the increase in customer, agent and merchant numbers, the increase in the average number of transactions per customer, as well as the increased value paid to M-SHWARI users in interest. The greatest value continues to be felt by the customer stakeholder group. Customers benefit from improved ability to manage and save money, as well as the wellbeing that comes with access to goods, services and opportunities that would not previously have been available to them. The overall negative environmental impact on the Safaricom True Earnings was reduced. Total water consumption decreased, and the amount of water harvested by Safaricom has increased year on year. Carbon emission increased in FY18, but the negative impact of the carbon emissions on the results was reduced through the use of an updated, lower electricity emission factor (IEA 2014). There were also no recorded fatalities in FY18, further reducing the negative impact on the Safaricom True Earnings for the period.