Mark Zuckerberg made a sudden appearance in Nairobi last week in the dead of night on a scouting mission.
Facebook’s billionaire founder was after the crown jewel in East and Central Africa’s most profitable company, Safaricom: M-Pesa. Dressed characteristically nonchalantly in a grey T-shirt and blue jeans, Mr Zuckerberg laid out his intentions plainly. “I am here to learn about mobile money.” And to drive the point home to a group of star-struck journalists and start-up founders on the second floor of Nairobi’s Bishop Magua building, Zuckerberg gently alluded to Kenya’s wilful blindness. “For folks who spend a lot of time in the entrepreneurial ecosystem here [in Kenya], it may be hard to appreciate just how advanced the Kenyan system is over others, and I think there are a lot of lessons we can learn to help build services for people in the rest of the world,” he said.
Kenyans depend and spend on M-Pesa with a frequency that is often forgotten. Last year, Sh14 billion was transacted through M-Pesa. Every day. To put this amount in context, what Kenyans transact in just three days would be more than enough to build another Thika superhighway.
This disruption of the financial and payments system is M-Pesa’s greatest selling point, and is likened to US Silicon Valley disrupters Uber (transport), Airbnb (accommodation) and Facebook (social interaction). In the last decade, Facebook has moved from a web platform that allows friends and families to keep in touch and share what is happening in their lives, to a company that seeks to exploit the future needs of social network users. Zuckerberg’s most expensive acquisitions, like Instagram, WhatsApp, and Oculus VR, are geared towards linking the social network platform to photo-sharing, instant messaging and virtual reality, respectively.
And Facebook is aware that the next ‘billionth milestone’ will come from Africa. To this end, the company has ventured into connectivity, signing partnerships with telecommunications service providers like Airtel, through Internet.org, to provide Internet connectivity in poor regions. M-Pesa is an innovation of interest for the tech giant and provides two key opportunities for growth and profits: a profitable and growing mobile payments infrastructure, and an additional network of mobile applications connecting more users (and more eyeballs) to the platform. This is why Zuckerberg’s interest was on how Kenyan start-ups like Twiga Foods ride on M-Pesa to create a sustainable business. “It is very fascinating how they [Twiga Foods] collapse the value chain of delivering produce to people, and in each step of the way you get the sense that it is only possible because you can move money around very efficiently in a way you can’t in other countries, including the US,” he said.
But it is not only Western economies that have failed to master mobile money. Vodacom shut down its M-Pesa division in South Africa in June this year over insufficient traction six years after a colourful launch. MTN, Africa’s largest telecommunications firm, last week announced it had stopped signing up new subscribers onto its mobile money network as it studies the visibility of the product. Analysts suggest it could be culled from the company’s business. Economist Laura Llewellyn-Jones from the UK’s Institute of Economic Affairs states that M-Pesa has been successful in Kenya because of a perfect combination of exploiting a gap in financial inclusion and an enabling regulatory environment.
“Kenya has been successful due to mobile money being ‘telecom-led’,” she said. Comparing Kenya’s adoption to Nigeria’s, Ms Llewellyn-Jones said despite Nigeria’s dire need for mobile money, traction remains low due to an overbearing regulatory environment. “The main blame for the slow take up of mobile money falls on the Nigerian Central Bank (NCB) for following a ‘bank-led’ model, rather than licence telecommunication companies to do it,” she said.
CRACK THE MAGIC
It was, therefore, not surprising that Zuckerberg’s short visit to Nairobi included a lunch with ICT Cabinet Secretary Joe Mucheru and Principal Secretary Victor Kyalo for a feel of the regulatory environment. “As the Government, we always work to make it known to global business leaders like Mr Zuckerberg that they are welcome to do business in Kenya. This is because we realise that if we are not receptive, they can just as easily seek out other markets,” Mr Mucheru said.
Safaricom CEO Bob Collymore acknowledged that tech giants have been interested in M-Pesa’s model in the past, and continue to explore new ways to crack the magic. “Google, Apple, Facebook are all looking at how to do payments beyond cards and online, so we will see a number of mobile-based money transfer systems in the coming future; and some will work, some will not,” he said. “We think at some point M-Pesa will be disrupted by something else, and we would rather be working in partnership with people who bring opportunities to us and disrupt ourselves than have others disrupt us without us being a part of that conversation.”
When I asked Zuckerberg if there is space for M-Pesa in the Facebook ecosystem, he said; “I hope so. I am not sure Facebook is going to do the whole thing. We’ll probably take a partnership approach, like what we did with connectivity. We do some part in terms of technology development and local operators and governments,” he said. “I think the question is, do people on WhatsApp and on Facebook Messenger want to talk with businesses and transact with them? I think they do.”