Monthly Archives: October 2012

Who Created M-Pesa?

M-Pesa is officially over five years old and is celebrated as the greatest use of mobile money in the world with about 15 million users. But the question of who created M-Pesa has never been resolved..until now. 

On Sunday, there was a day-long outage of M-Pesa which Safaricom attributed to a power outage on a Vodafone server in Germany and this started quite a bit of discussion on twitter about why the service is run from Germany and how authentically Kenyan M-Pesa really is.

I’ve been in touch with Paul Makin before and so I invited him to join the conversation by tagging him and he went on to engage by giving answers to questions from twitter pals like @MediaMK @IddSalim @TerryAnneChebet and @Coldtusker who were genuinely interested and drove the conversation.

Excerpts: 

  • No-one GIVES me authority. As the original architect, I TAKE it.
  • Original team was Nick Hughes and me. I came up with concept and architecture.
  • Nick forced it through the business. Susie Lonie joined after about 6 months.
  • This was all back in 2004. Took 3 years to get to launch.
  • Susie made sure it worked on the ground. She went around forcing people to work together.
  • We chose Sagentia to do the build. They did a good job. M-Pesa was a good team in those days.. didn’t say that. The TEAM chose Sagentia.
  • So I didn’t build it, the team did. It was my concept and original design, though.
  • DFID money said KE and/or TZ. We couldn’t find the right partners in TZ.. plus we liked entrepreneurial culture in KE. People were keen to work with us.
  • It was matched funding. DFID money only helped (the) pilot. VF money funded the live service. VF invested a lot.
  • VF own all the IP. They paid for it.
  •  There was a small pilot. Once proven, VF turned it into a commercial service
  • SF extremely helpful, and KE a good environment for innovation. People willing to try new things and try to make business!
  • No, but they were a good partner network. Very supportive. And you can’t do proper security without being in the network!
  • We spent a lot of time in KE, talking to ordinary people (not big business). That’s where the idea came from
  • I get annoyed when I see people who joined months/years l8r claiming they designed it!
  • We talked as a team in a Nairobi bar. Came up with it, asked the barman (edit). He liked it, so it stuck. VF didn’t like the name. Not corporate enough. But Nick fought for it, and won.
  • Wouldn’t have happened without him. He made sure SF worked with us, and worked with Nick to get it through VF
  • There were the agents, who worked very hard. Without agents, M-Pesa is nothing.
  • Lots of people came out of the woodwork, trying to claim it. Not good.

What’s Else is Known?

The 2008 Safaricom IPO prospectus noted that; 

All intellectual property rights in M-PESA belongs to Vodafone and are licensed to Safaricom under a trademark license agreement…Vodafone shall provide the managed services to Safaricom and shall authorize Safaricom to operate the M-PESA service in Kenya. Safaricom shall market and offer the M-PESA service to prospective customers, agents and merchants in Kenya and will be responsible for all associated end user-facing activities …

When (then CEO) Michael Joseph spoke at the iHub in 2010 he said this about M-Pesa;

…Vodafone won £1 million DFID (UK) award for deepening financial penetration for the unbanked, which they also had to match financially – and they were to develop a system for the disbursement and repayment of microfinance loans. They tested in Thika for 6 months and realized that it had more potential as a money transfer tool, and they launched M-pesa in March 2007… also that big multinational banks who had shut down rural branches abandoning their customer opposed m-pesa and fought in government & parliament and would have succeeded till he persuaded acting finance minister John Michuki to green light M-pesa.

Other attributes on the origin and prevalence of M-Pesa in Kenya include:

  • Different groups of Kenyans who say they invented M-Pesa.
  •  There’s a lawsuit hanging over M-Pesa
  • The agent network or the branding as the reason for its success.

Why Mosquitoes love Nairobi but don’t bring Malaria

A while ago, I posted a query to @ICIPE and got a somewhat reassuring response from one of their scientists. ICIPE  stands for the International Centre of Insect Physiology and Ecology and they do research on tropical diseases.

Yes, Nairobi is becoming a home of many mosquitoes but mostly culex mosquitoes – they do not transmit malaria but are a biting nuisance. The main reason for their increase is the increasing urbanization which is taking place without consideration of health and safety issues. Urbanization causes changes in land use and creates breeding sites for mosquitoes and other public health nuisance insects.

 People need to be aware of this and take measures to control them – like sleeping under a net and using proper sanitation. For further details, please see the quick tips to control mosquitoes and malaria.

Snooze and Lose Your Investments

A few years ago, the Government proposed a plan to utilize unclaimed dividends for first proposed – targeting  these dormant funds and have them added to an existing (CMA) investor compensation fund

Shareholders of listed companies duly approved these changes into their company rules, with a bit of debate at more than a few companies annual general meetings (see Diamond Trust 2008 AGM)

Now there are daily ads in the papers urging shareholders to step forward and claim their  past dividends before they are transferred, not to the CMA investor compensation fund to a (Government) Unclaimed Financial Assets Authority.
Loose Notes at Blancos Restaurant

It gets even more serious with the Barclays Bank of Kenya this wee which also added that the new rule would rope in, not just dividends unclaimed for more than 3 years, but also 

– Bankers cheques & foreign drafts not presented for payment for over 2 years.
– Deposits held in bank accounts that have remained dormant for over 5 years.
– Safe deposit boxes that haven’t paid rental fees for more than 2 years.

This is an unfortunate adaptation of a well intentioned plan and It seems there will be no recourse for shareholders who have been incommunicado for what could be a simple reason of changing a post office box address. (Some people also abandon bank accounts, leaving the funds to run out in lieu of formally closing the account and incurring a (frivolous) bank account closure charge).

There are also dormant ‘investor’ funds frozen in bank accounts opened during the the pyramid scheme era that preceded the last election, but the bulk of the idle funds could be due to cases of people who died without wills (and the court are trying to sort out their estates) or other undetermined court cases in which none of the parties can access the bank account funds. 

Will the rule also extend to cooperative societies (Co-Op’s), the contents of the safe deposit boxes, land companies, and private companies? 

Edit: Via Mark Mwangi, here’s a link to the  Unclaimed Financial Assets Bill.

Real Estate Moment: Property Expo, Bubbles, Mortgage Rates

A Homes expo took place  last weekend at KICC. Around that, other real estate matters include:
Mortgage rates down: The launch of the quarterly HassConsult property report showed  that the average mortgage interest rate in Kenya is now 19%, down from 22.5% three months ago. 
A Diaspora SACCO was launched with a view towards investing in real estate.
Aground breaking was held for the recently announced next phase  of the Nairobi Business Park which will comprise 15,000 Sq.M of space for restaurants, a fitness centre and convenience stores. At the event, Mugo Kibati the Director General of Vision 2030 said that the property industry accounts for 5.3% of Kenya’s GDP.
Exotic Marketing: Recognizing a challenge that homeowners face by moving further from the city, some developers now advertise themselves in terms of proximity to essential service centres. e.g. Olive Tree apartments [3Br for Kshs 7M] on Kiambu Road list about 5 schools, a mall, hospital and bus stop near the complex.
Kahawa – by @TheMumbi
Others advertise their properties on trucks, on large roadside billboard, in bank halls, have scheduled bus tours for prospective buyers to view the upcoming properties, or send out targeted promotions aimed at the ‘laptop and latte’ class [“Legacy Apartments (starting at Kshs 3.95M in the Dagoretti area] or proximity to high altitude [Serene Valley Properties, Sigona Valley – 3 and 4 bedroom villas in three different house designs costing between KShs 16M – 19M.
Land Bubble: According to an A4Architect Q&A, construction costs have not changed much it it’s land prices that have. Elsewhere they note an infrastructure effect on land prices which can be as much as 1,000% compared to 100% for other land prices over a short period. 

Coast Concern: However at the Kenya Coast, it seems to be the other way as  land issues are among the key grievances that have resulted in unrest and recent attacks on police and politicians.

Expo: Using a 3 bedroom apartment or 3 bedroom house for comparison and with the US dollar exchanging at about 85 Kenya shillings, some properties and exhibitors at the Expo included:

Nairobi
Home Expo, Nairobi October 2012
– The Prism (model drawing below) by Kings Developers will be a new office block on one of the  Ngong Avenues in Upper Hill
– Dara Springs by the China Young Tai Co has 3BR Apts in Kileleshwa for Kshs 17M and they are also developing 6BR townhouses at Karen Splendour to sell at  Kshs 95M
– Imara Gardens are 3BR Apts in Imara Daima for Kshs 7.8M

North
– Edenville in Kiambu from HassConsult has 3BR Camellia Villa’s for Kshs 13.5M
– Chania Gardens in Thika have 3BR maisonettes for Kshs 8M
– Sahara Ridge in Ruiru have 3BR maisonettes  for Kshs 9.5M at Hass Consult
– Canary Springs are 3BR Apts in Ruaka for Kshs 7M 
South
– GreenPark Estate from Superior Homes  (winner of Best Development in a 2007 International Property Award)  is a managed estate
– Lukenya Hills have 3BR bungalows for Kshs 6M in Mlolongo, by SJR who put up the Safaricom headquarters buildings
– 360 Degree Court are apartments in Syokimau for Kshs 5.5M by Kings Developers

East
– Jacaranda Gardens off the Northern Bypass are 3BR Apts for Kshs 7.6M – built by the Sietco & the Chengdu Jiangong 3rd Investment Company
Out of Nairobi
– Milimani Apartments in Nakuru by Kings Developers have  3BR Apts for Kshs  4.5M
– Konza  ½ acre plots for Kshs 2M from Petu Properties and these are 11 Kilometres from the Malili technology city which, along with Tatu City (on Thika Rd), are two new cities planned to be built near Nairobi

Financers
– Investment & Mortgages Bank
– KCB’s Savings & Loan has finance of  13.5% available up to 25 years for ready built or for construction of homes. A Kshs 8.5M (~$100,000) home will attract monthly repayments of Kshs 195,000 over 5 years or Kshs 99,000 (~$1,160) if paid over 25 years.
– National Bank  has mortgages of up to 20 years at 15%, with up to 90% finance.
Planned Prism Tower
– Standard chartered has mortgages at 14.9% and a Kshs 8M loan can be repaid over 5 years at Kshs 189,000 or Kshs 104,000 (~$1,220) per month over 20 years.

Other
The Mortgage Company (TMC) is a mortgage broker that help home buyers source loans from different banks. TMC, with it’s partners Oaks Construction and Rafiki Microfinance also has a  makazi mema program that aims to  finance and construct houses within 6 months for maisonettes (and bungalows in 4 months) with the building cost of a 3BR home being about Kshs 2.4M ($28,000)
–       
Savannah Cement is the sixth cement company in the country – and they have two brands of cement, one of which costs Kshs 670 ($7.90) for a 50Kg bag 

The Kenya Revenue Authority had at the stand there. Their brochures note that property owners in the Diaspora who rent our property in Kenya are meant to pay income tax in Kenya on their rental income. 

Low Cost Flights for Africa?

In a few weeks time FastJet should be flying a leased Airbus A319 between Dar es Salaam and Nairobi. FastJet, who are listed on the London Stock Exchange, are part of a group that flies 4 million people a year. Their experience in Europe and Asia shows that the licensing of low cost carriers increases the number of flyers. They won’t be here to compete with Kenya Airways (KQ) or Precision Air, which is Tanzania’s dominant air carrier, but their target is people who take buses between Nairobi and Dar Es Salaam  (or Nairobi and Mombasa) and they will be offering fares that start as low as $20 before taxes and are ambitious to roll out the model across other African countries

New look FastJet

A current search on the local TravelStart site shows that  one way flights between Dar and Nairobi attract taxes of between $90 and $110 – so there’s no feasible way passengers will be paying anything less than $120 per flight – and high airport taxes are the norm in many African countries. Not all seats on the plane will costs $20 (Kshs 1,700) – and they will be sold in increasing blocks as the flight gets fuller and the dates closer, such that those who choose to pay last minute will pay almost a full fare. 
Fly540 will still be around

Fly540 itself should still be around flying, on routes that the A319’s can’t fly to, and the next bases for Fastjet  as the lease more A319’s are likely to be Nairobi, Accra, and  Luanda.

Also licensed in the same week was JamboJet, a planned low cost carrier from Kenya Airways.  A few years ago, KQ ran an airline called Flamingo Air, but it was not really a low cost – not in terns of fares  or level of service which were comparable to other domestic Kenya Airways flights. 

Do African passengers really understand what low costs flights  mean? That there will be no food or drink unless you pay? That you will be charged extra for your bags? Or that you may be asked to clean your seat? That has to come out clearly in the marketing of these tickets  to sensitize flyers on the type of service to expect.