Hidden Profits: Safaricom’s hidden source of HUGE profits that business journalists missed

Safaricom’s hidden source of HUGE profits that business journalists missed

By Special Kumekucha make money correspondent

Note from Kumekucha Chris: It gives me great pleasure to introduce this brand new weekly column by a man who makes a living helping businesses find hidden profits. ENJOY!!

As I write this (20th June 2011) all signs are that we are headed for a serious recession in these shores, indeed yours truly agrees with Kumekucha Chris that it is going to be so serious that it will easily be unprecedented in terms of its effects on the country called Kenya. This makes the following question rather appropriate just now.

What really makes the difference between a really profitable business and one that never comes anywhere near its’ full potential? I will give you a clue; it is something that both Kenya’s Safaricom and the internationally acclaimed Google have in common.

It is simply this; both these enterprises are not frightened of trying out new things all the time. In my time I have met many entrepreneurs who are terrified of risk—any risk. Admittedly if you are reckless enough to keep on trying new things on your already profitable business you are bound to fail many times and naturally this is very embarrassing. Indeed if you carefully examine both Safaricom and Google, you will discover that both businesses have had very spectacular failures in their continued “reckless” efforts to always try out new things.

Remember Safaricom’s Simu ya Jamii? This was the scheme where people were supposed to make money running telephone kiosks. Some remember this much more painfully than others in that they invested cash into it and lost it. Former Safaricom CEO Michael Joseph himself acknowledged in an interview with The Star that the scheme was one of the company’s biggest failures.

But out of 100 reckless failures comes one spectacular success that cancels the failures and gives you untold wealth and profits. Oh yes, it happens all the time.

I am sure you’ve heard of a company called Google haven’t you? Google is a $US100billion company that was started from nothing barely 11 years ago. Here is what the founders Sergey Brin (37) and Larry Page (38) had to say in September 2003 in a talk they gave to hundreds of Israeli students at a high school in Israel.

“Have a healthy disregard for the impossible… You should try to do things that most people would not.” –Larry Page.

“The only way you are going to have success is to have lots of failures first.”
-Sergey Brin

Google is not a $US 100 billion company for nothing and they have done a lot of interesting “reckless” things. But today I will focus closer to home and on Safaricom. Safaricom is a Kshs 200 billion company that is easily the most profitable enterprise in the history of East and Central Africa. The company also has some very humble beginnings.

Many of the reckless things the company has done (many others remain a secret) have failed but amongst the few reckless things that worked are the Mpesa money transfer service and the Okoa Jahazi scheme where subscribers can borrow airtime.

Think about it for a minute and be very honest. What would you have thought if somebody came up to you and suggested that you dish out cash loans to all and sundry. In fact small amounts of cash (Kshs 50/-) meaning that you have no way of recovering it incase they default. I mean I can always borrow airtime and then change my sim card and get a new line the next day. Of course the fact that they found a way to make it work is because somebody entertained the ridiculously reckless idea and gave it some deep thought. Get my drift?

The wild okoa jahazi idea has not only earned Safaricom billions in extra profits since it was launched in 2009 but it has also greatly shielded the company from fierce emerging competition and price wars that would easily have wiped out a “less reckless” company.

Let’s look at some numbers so that we put this Okoa Jahazi thing into proper perspective. We are told that the day the service was launched on 15th April 2009, it got 1.7 million users. Multiply that by Kshs 50 and you get Kshs 75 million. The 10% charged for the service gave the company Kshs 7.5 million on a single day. Hidden profits that came from nowhere. And remember that the company did not have to put any money down. It just offered its’ services on credit (and at that time the service only served online calls and did not work with calls outside the Safaricom network). Another blogger estimated at the time of launch that this service was going to give Safaricom a minimum of Kshs 1.83 billion a year. Some reckless profits from some recklessness don’t you think?

Interestingly nobody has analyzed the contribution Okoa jahazi made to Safaricom’s current profits? Our business journalists all missed it in their detailed analysis of the company’s profits.

Now that is what I call hidden profits.

This week’s lesson: The thing you should fear most is the fear of failure that paralyzes you. You should be terrified of it. Absolutely terrified.