I had the distinct honour of playing some role in the decoupling of Safaricom from Telkom Kenya.
Safaricom had been formed in 1997 as a fully owned subsidiary of Telkom Kenya, which had itself been formed after the separation of the telecommunication and postal functions of the erstwhile Kenya Posts and Telecommunications Corporation, a large State monopoly that had existed since independence.
Vodafone Group PLC of the United Kingdom acquired a 40 per cent stake in Safaricom in May 2000 and took over the management responsibility for the company.
The Kibaki government, in which I served as Permanent Secretary, pursued further liberalisation of the sector to give the company an opportunity to fairly compete. Later, we oversaw the company’s issuance of its initial public offering (IPO) at the Nairobi Securities Exchange (NSE).
Greatest fear
Our greatest fear then centred on whether the fledgling organisation could survive in a highly competitive environment. Luckily, Safaricom was being led by Michael Joseph at that time, and he embraced Joseph Schumpeter’s concept of creative destruction. The Austrian economist explained his idea in his 1942 book, Capitalism, Socialism, and Democracy in the following terms: The opening up of new markets, foreign or domestic, and the organisational development from the craft shop to such concerns as US Steel illustrate the same process of industrial mutation — if I may use that biological term — that incessantly revolutionises the economic structure from within, incessantly destroying the old one, incessantly creating a new one. This process of creative destruction is the essential fact about capitalism (p. 83).
One afternoon in 2007, Michael walked into my office to explain a new idea which might require Central Bank’s approval. He later sent two of his colleagues to demonstrate how this peer-to-peer money transfer would work.
A week later, he introduced it to the Board, explaining that it will be a customer retention product.
He had no pitch deck and had not quite developed the value proposition. He simply said the innovation would be used for customer retention. I was sold to the product.
I sought clarity from Central Bank and to their credit, the acting Governor then sent four officers to my office where the two Safaricom team, that I had met earlier, again came to demonstrate. The CBK officers became our allies in selling an idea that had never existed before. Like any good idea in Kenya, resistance started to creep in.
While I pursued the […]
