Wednesday, August 25, 2010

Can you be the next Donald Trump (in Kenya)?

Stephen Alala, co-founder of SoftLaw once told me an interesting story about a lawyer who while doing an assignment for a venture capital firm was so enthralled by the work that he decided to quit the practice and join the angel investors. At the next meeting with the other angels, intending to wow the board he excitedly gave a presentation on a new business venture that would make the firm triple-digit returns on their investment. He was therefore surprised that after he finished his pitch the expressions on the faces of the board members all around the table were unimpressed, bored, and even disgusted. One of the friendlier faces explained the mood with a question "it's all well and good that this idea can make money, but will it race up my pulse, make my mouth dry, keep me from sleeping at night, and wake me up early in the morning twitching and excited?"

Simply put, these angel investors had already made tons of money, and that alone could not excite them. What they needed was an idea that they were so passionate about, that it would occupy their every waking thought.

I took a lot of comfort in this story, because I've also always pursued business with the need to achieve something greater than making money. My passion is to support, grow, and develop other entrepreneurs through sharing knowledge and leveraging the power of technology. The difference is that for me that I am yet to make tons of money :( Well today I want to try something different,  I want to blog about what makes a lot of money in Kenya - the property business.

In the past few years, we've probably witness more new millionaires in Kenya than at any other point in our history as land prices shot through the roof and beyond. I hear stories of someone who bought a 'shamba' at KES. 15,000 back in the nineties, and now is selling it at KES. 5,000,000. Or of masaai sons whose father left them 'worthless' hundreds of acres in Kitengela. Land brokers who got on the gravy train early on are now living off the fat of their early bird status.

It is pointless to look at this and wishfully think. To be a true property tycoon, one now has to rightly predict how the property market will look five years from now and make the right decisions. Today, I will give you my three predictions on how to make money in property in the coming years.

1. First of all we must realise that land speculation as we know it (in Nairobi) , is all but finished as a way to make money. Not only will the new provisions of the constitution discourage this by taxing people for idle land, but we will also witness a high urban to rural migration that will take pressure off land outlying Nairobi that has seen the highest price increases. If you want to make money, then you need to know where migration will be going to.

My prediction is that with the decentralisation of government through counties, a lot of this migration shall be to the centres of these counties. Also unlike before where the central government retained control of the purse strings, this time money shall flow to the counties. This will mean that marginalised low density population counties like Tana River which has adequate natural resources will now have plenty of cash to develop. The bigger budget and smaller competition population-wise for the money will mean traders, merchants, and brokers of all and sundry shall flock to such areas.

Whoever owns the land around these areas which can be bought pretty cheap now will be in prime position to benefit from the migration.

2. Donald Trump made money in New York by taking on large building projects in Manhattan that would offer opportunities for earning high profits, utilizing attractive architectural design, and winning public recognition. He was a master at turning derelict properties into high-class real-estate. Despite my predicted urban-to-rural migration, I believe Nairobi will remain a growing city and the commercial centre of Kenya and Eastern Africa. More and more local and international businesses will want to set up in Nairobi. With the impending completion of the widening and modernisation of Thika Road, the Eastern side of the CBD (the area between Globe Cinema roundabout, Kirinyaga Road, and Ring Road will be prime real-estate to renovate (if one can manage the politics Donald Trump style). Already there are plans to turn Muthurwa estate into a modern state-of-the art residential and commercial complex. Once this is done there will be pressure on the property around it and investors will be willing to put up similar properties.

3. Thirdly... ummm okay it seems I only had two predictions, but keep your eyes on this space as I share more wacky ideas on how to be the next (Kenyan) Donald Trump.

Sunday, August 22, 2010

Why I will not be moving from Safaricom

For those who've been reading my blog you know that I have a love/hate relationship with Safaricom. One week I will lavish praise on them, the next I'll be trashing them. With such swinging passions, it is easy to find inspiration to write on them, and resultantly I do it often. This week I'm at it again, giving my 3 reasons why I'll be sticking with Big Green and ignore the Vuka to Zhairtel wave currently going on.

1. Data Services.

Safaricom's recent press release responding to its competitors drop in voice call charges captured one thing right on the mark. They are no longer just a mobile telephone company, they are a total (communications) solutions company. Just like DoCoMo of Japan, Safaricom early on realized that voice services were not enough and their future lay in data/internet services on mobile phone handsets. They've gone ahead and backed this conviction with some serious investment in 3G, fibre, WiMax, and now 4G. Safaricom has not stopped at infrastructure, they are also leading in the development and distribution of local content. Their safaricom.com portal and facebook face off promotion are some examples of this.

What Zhairtel might not see is that with the rapidly improving network infrastructure and availability of smart phones a time will come when VOIP is a cheaper alternative to voice calls. When this happens, I want to be with the operator who has invested in data services.

2. M-PESA

Two years ago, I blogged here how Safaricom would transform itself into a bank on the back of its wildly successful MPESA product. At that time there were 2 million MPESA users, right now this figure has exploded and more than 10 million have MPESA accounts. Well, Safaricom has not out-rightly transformed into a bank, but products like M-KESHO show that it is serious about its financial services division. I'll make another prediction here, and that is that in 3 years, M-PESA and its offshoots will be Safaricom's largest revenue earner and flagship product.


I strongly believe MPESA is the future of commerce in Kenya, with more and more services going online, M-PESA is primed to become the number 1 payment system in Kenya. Already PayBill is being used for services as varied as airline booking, classifieds, and utility payments. Buying goods at the supermarket seems also to be on the cards for Safaricom considering their Buy Goods menu under the M-PESA menu.


Kenya is well positioned to be a leader in mobile commerce and Safaricom is in the best position to lead this revolution.


3. Safaricom Innovation Board


Of all things that make me want to remain with Safaricom, this is probably the most important. I have seen a Vuka phenomenon before and after all the excitement I know most of us went back to Safaricom with our tails between our legs.


Innovation is the lifeblood of any company and Safaricom seem to understand this very well. Price wars will work for a while but what happens when Safaricom also reduces its price? As the market leader it means Zhairtel will have to go back to the drawing board, and if start another price war, they might just push themselves into bankruptcy and/or another sale of their business. The only way for a company to maintain its market share and outperform the competition is to innovate. The Safaricom Innovation Hub will not only capture the best ideas in the country but will also (however unfairly) own them exclusively to the detriment of its competitors

So today, as you laugh at the Inspekta Mwala ads and buy your umpteenth Zain card, I will remain with my 'ol green 0722.

NB: On page 7 of the Sunday Nation (August 22, 2010) there is an ad of green text on white background that reads "MASAA YA KUBAMBA INAKUJA". I think Zhairtel might want to hold off the popping of champagne bottles for now if this ad means what I think, which is that Safaricom is not going to lied down and let its customers walk away.

Monday, August 09, 2010

Chopping up the big green giant (Safaricom)

It’s time to take Safaricom down. It’s time to chop up that green giant into smaller pieces.

In just 10 short years, Safaricom Ltd has grown from a small unprofitable subsidiary of Telkom Kenya catering to the uber rich into Kenya’s largest telecommunications company, ISP, and bank. This behemoth, with its size, information control, and growing database of personal information of its clients threatens our economic stabilty, individual liberties and our sovereignty and  cannot afford to left this unchecked. At the end of this speech, fellow toastmasters you will join my petition to have Safaricom Ltd, be broken up into smaller, more regulated companies.

1.       The first and most obvious reason why we need to break up Safaricom is because of its sheer size. In every category, Safaricom is a lumbering giant. It has over millions of Kenyans using its services and makes billions for its shareholders and government. 


While these numbers may bring comfort to it’s over 500,000 shareholders, we should remember that the bigger they are, the harder they fall. We have already seen our government backtrack from regulating Safaricom’s prices when it complained; it is not therefore a stretch to say that our government may consider Safaricom “Too big to fail”.


The “too big to fail” public policy means that if Safaricom fails to manage its risk effectively and is under threat of insolvency, the government may use taxpayer money to prop up the company.  The TBTF policy which has been applied to America’s biggest companies in the past two years has been shown to encourage laziness, promote rapacious business activities, and increase market nervousness.  It is a policy that can destroy our fragile economy while unfairly promoting corporate interests.


For everyones’ benefit we need to ensure Safaricom remains a robust company and the only way to do this is to break it into smaller, more nimble, more manageable companies which do not have the power to hold our economy at ransom.


2.       If the threat of the giant falling is not worring enough, then this second reason should convince you that the time to break-up Safaricom is now. We all cheered when Safaricom came to town, and happily embraced its services. Little did we know that as we called more, texted more, mpesad more, and surfed more, we were creating an Orwellian Big Brother. It can hear you, read about you, knows who you are, where you are, how you spend money, what information you search for and which friends you have.


We have already seen this power being abused through Premium Rate Service providers affiliated to Safaricom who send us marketing messages for lotteries, or political messages to influence our vote.  The trend from using this power for marketing to using it for political goals is indeed worring. Many Kenyans rely on Safaricom to access information, and it is easy to see how this dependency can be abused to spread propaganda and misinformation.


While the executives of Safaricom may have the noblest intentions, it is a historical fact that power corrupts. We should not wait to act when the company has been corrupted and we are in bondage. The company must be broken now to decentralise its growing power and potential for control.


3.       Threatening our individual liberties is a good enough reason to break the company up, but this third reason takes the cake, on why breaking the company up should be done immediately. Recently our government directed that mobile phone companies register their subscribers to reduce mobile phone related crime. While the intentions are good, the jury is still out on how effective registration will be in curbing crime. The secondary effect is however clear, which is that Safaricom will amass sensitive personal information on a large population of Kenyans to add on what they have already collected. 

The information acquired by Safaricom will rival - in utility - even that of the immigration and National Registry Bureau, as it will be current, in electronic form, and have mobile phone numbers. At 16 million subscribers, we shall witness the birth of the Safaricom nation and whoever controls this data will be very dangerous, and to leave it to a private entity that is majority owned by foreigners is to threaten our social fabric and sovereignty.

I admire Safaricom as a business, and find their services very useful; but I cannot stand by and let the potential for Safaricom’s turn to evil threaten my livelihood, threaten my freedom, and threaten my nation. I ask you to join me today in choosing economic stabilty, choosing individual freedom, and choosing social stability by signing my petition to break up Safaricom into smaller companies.

In conclusion I will ll leave you with a quote from Ayn Rand, substituting the word collectivism with Safaricom

"The greatest guilt of today is that of people who accept Safaricom by moral default; the people who seek protection from the necessity of taking a stand, by refusing to admit to themselves the nature of that which they are accepting; the people who support plans specifically designed to achieve serfdom, but hide behind the empty assertion that they are lovers of freedom, with no concrete meaning attached to the word; the people who believe that the content of ideas need not be examined, that principles need not be defined, and that facts can be eliminated by keeping one's eyes shut. They expect, when they find themselves in a world of bloody ruins and concentration camps, to escape moral responsibility by wailing: "But I didn't mean this!"


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 Please note that this was my Project #3 speech at Nairobi Toastmasters. This is a fictional petition and I do necessarily think Safaricom is evil.