Kenya has become a symbol for the mobile revolution in Africa. ARTHUR GOLDSTUCK went to Nairobi to learn more.
There are only two things you can’t avoid on the streets of Nairobi: potholes and cellphone advertisements.
The potholes add to the cost of doing business in Kenya through both damage to vehicles and turning traffic into a nightmare. The pervasive adverts are a symbol of an industry that is transforming the country. It also offers any number of lessons for South Africa.
Kenya has become the standard-bearer in Africa for what can be achieved with mobile phones when the regulatory authorities step out of the way – and the networks embrace the competitive spirit. It has leapfrogged the rest of Africa in affordability of voice calls, data use and money transfer. And size of market has nothing to do with it.
Kenya has 25-million mobile subscribers, just under half the size of the South African market. In just the last three months of last year, the number increased by 2.9-million. Not surprisingly, that went hand in hand with a rapid drop in the cost of making a call. The average cost of a call made between two networks dropped from 11 Kenya shillings (about R1.17) at the end of the first quarter of 2010. to 5.10 shillings (54c) in the third quarter, to 3.47 (37c) in the last quarter of the year. For a contract customer, this drops even further, to about 30c.
Little wonder the cellphone has become not only pervasive, but also an indispensable tool in Kenya.
A brief exchange with a Nairobi taxi driver this week summed it up for me. He gave me his cellphone number in case I needed his services again, and added this caution: “I’m careful about who has my number. It’s my identity.””
Flowing from that concept, of the cellphone as the core of one’s commercial existence, anything else becomes possible.
In the last three years, the success of the mobile payments industry in Kenya has been the equivalent of a starter’s pistol for banks and payment providers across Africa. Everyone wants to replicate the model that has made M-Pesa – “”pesa”” is Swahili for “”money”” – a byword for transactions in East Africa.
M-Pesa was launched in South Africa late last year, with forecasts of 13-million users within two years – a figure intended to echo the user base it picked up in Kenya from 2008 to 2010. Not surprisingly, it turned out to be more hype than possibility, with only 60 000 users in the first six months. The truth is that Africa is not one country, and what works in one market does not work in another.
There are probably a dozen success factors for M-Pesa in Kenya that do not apply to South Africa, and those factors were already in place two years ago, before the cost of calls plummeted. But a key factor was the low cost of transactions. The cost of a cash transfer to a registered user starts at R1 for the minimum amount of R5, up to a R6 fee for the maximum transaction of R7000. In South Africa, the fee is a flat R2.45, even for the minimum R10 transfer. The maximum transfer allowed is R5000. So it works fine for the big numbers, but most transactions occur at the bottom of the pyramid.
That is the key to the mobile revolution in Kenya. Pricing is not designed to extract maximum revenue from the most valuable customers, i.e. the big spenders who can afford high tariffs. It is geared towards a mass market that is deeply price-sensitive ¬®C while also making the services irresistible to those with real disposable income.
For business travellers, it is the cheapest place in Africa to pick up a 3G modem with data included: around R170, compared to a typical R1000 upward in South Africa. Everyone assumes you will also have picked up a local SIM card, with pre-paid airtime. It just makes sense – as does so much about doing mobile business in Kenya.
* Arthur Goldstuck was a guest of Aitec Africa in Nairobi, where he presented a keynote address on the Success Factors for Mobile TV at the Broadcast & Film Africa conference. He heads up the World Wide Worx market research organisation, and he can be followed on Twitter on @art2gee
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1. They are partnered with a bank and SA banks are notorious for charging high fees.
2. The distribution of mpesa agents has not been as wide as hoped. So mpesa is not easily available in informal areas. Users still have to catch a taxi/bus to get access.
3. The sign up process is not as easy as it looks and Nedbank and Vodacom staff are not well trained
4. mpesa offers very few other services. Sure money transfer is great, but there are a host of add on services that could be rolled into the offering.
Access and price are the keys to success. I have no doubt they will be a serious contender in this space though!
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