Is Safaricom Being Greedy By Launching Services to Compete With Start-ups?

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By now you must have heard or read about Safaricom’s new product Lipa Kodi na Mpesa. When the news came out, there were collective mourns by a number of people who are involved in the startup ecosystem in Kenya. The expectation is that Safaricom should partner or acquire start-ups instead of starting a competing projects or services. Lipa Kodi Na Mpesa  is similar to what ManyattaRent guys have been doing for some time.

Sam Gichuru, Head of Nairobi Startups Incubation Center, The Nailab, on his twitter account compared Safacom to PayPal and asked what would have happened if PayPal had tried to do everything, the way Safaricom is doing in Kenya just because they control payment gateway

 

 

More questions than Answers

 

It is a good time to ask if the Kenyan start-ups are doing it wrong or  if Safaricom is out of line in coming up with the products which are similar to what some start-ups are already doing? World over, Start-ups are good at innovating and doing  new things better and hence outpacing the big companies. In most cases big companies usually decide not to start competing services but to acquire the start-ups already doing the same. Sometime the acquisition is all about getting the talents behind the start-up and not necessarily to own or operate the start-up. That is why we have seen many great services being killed after being acquired by big companies.

Despite what most people are saying, Kenya is a free market and therefore Safaricom has the right to do their business the way they want. In a competitive environment start-ups need to think fast, create fast, move fast and conquer fast.  The “Fast” should be to the extent that by the time the big boys think of coming for the same piece of pie, those involved would be ready to move to the next big thing.  Or better still, the Founders can believe in themselves and make their product the current big thing, and the process rendering the others irrelevant. A good example is Twitter…

Does Safaricom owe the Industry anything?  I think yes, and they have said so on several occasions that they will work to help the young people innovate.  In a number of tech events I have heard them talk about their commitment to help build a strong ecosystem. I guess if you ask them about that, they would point at Safaricom Appstar Challenge done last year.  Their other outstanding effort is their partnership with Strathmore to provide Masters in Computer Science.

The problem is, some of the things Safaricom are doing put them in direct competition or confrontation with a number of start-ups who feel they should be the Big Daddy. The argument against Safaricom  at this point is more of “you are huge….you are big… You have the money. ..You control Payment System.. You should help the industry to grow”.  I understand where my friend Sam Gichuru and others are coming from in this case but still we should also understand that Safaricom is in it for business. For them to partner or acquire a start-up, it is has to make business sense to them

And so it did not take long before ManyattaRent guys came out to claim that Safaricom stole their idea. According to HumanIpo,

“ManyattaRent founder Steve Ngethe Njoroge had accused Safaricom of stealing his idea after he proposed a partnership with the giant operator”

Go to ManyattaRent site and look at what they do.  They have been around for some time and even got some investment from 88mph. The problem is that they did not move fast enough to disrupt the market.

ManyattaRent

And the market we are talking about is huge. Kenya’s rental market is valued at an estimated Kshs.17.2B, which is 21% of the total value of the real estate market in Kenya.  The 2009 census revealed that there were an estimated 6.5 million rental households in Kenya and with the rapid urbanization, this figure is expected to be higher. Statistics from the World Bank indicate that the average rent paid in urban centres in Kenya is Kshs.5, 898.

So did Safaricom steal ManyattaRent idea? For some time I thought that they would make more money if they partner with Safaricom.  In my mind, Mpesa being the main payment system they are targeting would bring them more cash if they had gotten a way to partner with Safaricom. The information coming from Safaricom at this point is that Safaricom never received any proposal from ManyattaRent. Well, I don’t expect them to come out and say it but I talked someone else who has a deeper understanding of what happened. His view is, a meeting was mooted but it did not materialize.

First, people need to understand that you cannot patent idea but you can patent innovation.  The idea is very important but without any identifiable functions of it, it is not possible to protect it.  Copyrights everywhere help to protect expression while patents protects inventions.  At this stage ManyattaRent is not an idea but a product with practical functions. But still, you need to go further than that to understand whether it is a unique invention of some sort. People have been paying rents, through Mpesa transactions or other mobile payment systems for some time.  I know many people have been paying their rents through Mpesa for the last five years.  So paying through Mpesa or having system that will help people to pay for something through MPesa can not be considered unique idea. Safaricom for its part have been promoting Lipa NA Mpesa. Lipa na Mpesa means pay for  anything through Mpesa and that include the rents.

For the invention or innovation to be patentable:

  1. There should be some novelty in it. It has to be new.  Not publicly known, used or sold anywhere by the time you applying for the patent. Paying something through Mpesa, in the Kenyan context cannot be considered new. The only thing that can be said to be new is the back end codes used build the system on top of the MPesa platform. And even with that , it is only possible if it is hard coded  from the scratch …not using the existing replicable software like CMS
  2.  It should be nonobvious. Yes the invention must give new and nonobvious results compared to other approaches. Aggregating existing payment systems is not unique and every start-ups doing this in Kenya should understand that.
  3. And finally it has to have some functions and value to the society. Well….

In Kenya Safaricom has a bad reputation among the start-ups and the developers. It is seems that every product they launch, somebody would definitely come out to say they have stolen his/her idea. The question is why do start-ups rush to Safaricom with their ideas. You know them well, and understand that you might be short changed,  why go to them in the first place.

That a side, ManyattaRent still has the chance to do what they are doing better than Safaricom. I looked at the Safaricom Lipa Kodi na Mpesa charges and realized that is much cheaper to pay rent through normal direct Mpesa transactions. Actually Lipa Kodi Na Mpesa cost twice as much when compared to paying the rent directly through Mpesa. Look at the table below

Lipa Kodi na Mpesa Normal Mpesa Rate
Range Charges Range Charges
10 49 6 10 49 3
50 99 11 50 100 5
100 999 22 101 500 27
1000 2499 33 1000 5000 33
2500 4999 55
5000 9999 83 5001 20000 55
10000 19999 110
20000 34999 165 20001 45000 82
35000 49999 198 45001 70000 110
50000 70000 220

 

For someone who has been paying the rent directly through Mpesa, I don’t see the value in using the new service. May be for the landlords but I don’t see any advantage for the customers

What is your opinion on the topic?
Kennedy Kachwanya
Lead Blogger at Kachwanya.com
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Kennedy Kachwanya is a technology blogger interested in mobile phones both smart and dumb, mobile apps, mobile money, social media, startups ecosystem and digital Savannah. New media must not forget the strength of old tech.
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