Can Safaricom survive the death of its CEO?
Safaricom’s (SCOM) chief executive Bob Collymore died on July 1 of cancer after a long illness that had kept him away from the company while receiving treatment overseas. Safaricom shares lost 0.90% of their value in the week that Collymore died. The shares opened at Ksh28.10 on Monday, July 1 and were down at Ksh27.85 by the end of trading on Friday, July 5. The death of Collymore appeared to have shaken some investors’ confidence in Safaricom’s future, resulting in the drop in the share price.
Anticipating that the death of Collymore could spark a massive selloff in Safaricom stock, the company’s board moved swiftly to try to contain potential damage to the stock stemming from investor reactions to Collymore’s death. On Tuesday, a day after Collymore’s death, Safaricom board named Michael Joseph as its interim CEO. Joseph is a Safaricom veteran. He was the company’s CEO for 10 years before he handed over the reins to Collymore in 2010. Joseph told a meeting in Nairobi in October last year that he rooted for Collymore as his successor.
Joseph was the CEO who led Safaricom to its hugely successful initial public offering in 2008. He continued to serve on Safaricom’s board even after he stepped down as CEO.
As the executive who nurtured Safaricom from its infancy until it became a corporate giant, and as a longtime Safaricom board member, Joseph stood out as the ideal person to fill Collymore’s big shoes. Being a Safaricom veteran, Joseph is the kind of leader who can give confidence to investors that Collymore’s demise would not derail Safaricom’s efforts to continue creating value for shareholders.
Safaricom made a profit of Ksh63.4 billion in its 2019 financial year ended March 2019. The profit increased from Ksh55.3 billion in 2018 financial year.
Collymore wanted to see Safaricom expand more
Before his death, Collymore had led a number of initiatives aimed at boosting revenue and profits at Safaricom in order to generate more value for shareholders. This year, for instance, Safaricom has launched several expansion initiatives. In January, the company announced that it was venturing into the business of providing cybersecurity services. In March, Safaricom announced that it had secured a contract to handle payments from Kenya for Alibaba’s AliExpress marketplace. Alibaba is a Chinese e-commerce giant and AliExpress is its global online shopping platform used by merchants in Kenya to source goods from suppliers in China. In June, Safaricom partnered with Equity Bank (EQTY) on a lending programme aimed at benefiting its suppliers and merchants.
Safaricom also has discussed expanding into Ethiopia by introducing its Mpesa mobile payment service in the country. Ethiopian Prime Minister Abiy Ahmed is undertaking major economic reforms aimed at attracting more foreign investment into the company. Some of the sectors that Abiy wants to open up to foreign companies include telecommunications and banking. Ethiopia is home to more than 100 million consumers who could benefit from Safaricom’s Mpesa service.
Mpesa is one of Safaricom’s fastest-growing businesses. The Mpesa business generated Ksh75 billion in revenue for Safaricom in the company’s financial year ended March 2019, growing 19% from the previous financial year and contributing almost 30% of Safaricom’s total revenue.
Kenya companies keen on Ethiopia expansion
Besides Safaricom, the other Kenyan companies eyeing expansion into Ethiopia include Equity Bank (EQTY) and Kenya Commercial Bank (KCB). The two lenders have opened representative offices in Ethiopia and are gearing up to begin operations in the country any time.