They say in academic world that the capital markets normally facilitate the efficient allocation of scarce financial resources. The capital market mobilize fund from different players like savers, investors to different firms that use the capital to finance different projects. Informational efficiency makes it possible for the capital market to channel resources to the highest valued projects. In other words, the resources are meant to be invested in areas expected to have high returns, and withdrawn from areas with low prospects. This bring us to one headline which appeared recently on Business daily
“Safaricom share now accounts for 58pc of all NSE stocks”
That is huge but the most important thing is the message it sends in terms of the confidence the investors have on Safaricom and its future prospects. It is not hard to see and understand why Safaricom is dominating the NSE stocks market. Apart from the confidence that investors have on the firm, economically speaking Safaricom is many things to every Kenyan
Safaricom on its part has always aspired to use its mobile telecommunications products and services to improve the quality of life and contribute to sustainable livelihoods for Kenyan citizens. They’ve in many instances partner with international companies to assess how successful it has been in achieving its goal and how it can increase the value it creates for communities still further.
While Kenya has made significant political, structural, and economic reforms that have largely driven sustained economic growth, social development, and political gains over the past decade, key development challenges still remain poverty, inequality, climate change, continued weak private sector investment, and the vulnerability of the economy to internal and external shocks. Kenya’s economic growth averaged 5.7% in 2019 and was ranked one of the fastest-growing economies in Sub-Saharan Africa. However, in 2020 due to the COVID-19 pandemic, real gross domestic product (GDP) growth was projected to decelerate from an annual average of 5.7% (2015-2019) to 1.5% by the World Bank.
One of the main key players of a dynamic private sector that continues to place Kenya at economic potentiality is Safaricom. The company is the first in Africa to monetize and publicly communicate the value it creates for its societies. Safaricom in the financial year 2019-2020, sustained more than one million direct and indirect jobs, contributing 6% to the country’s Gross Domestic Product (GDP).
The economic impact of its estimated KSh 262.6 billion in annual revenues generated from its operations resulted in an estimated KSh 549.8 billion contributions to Gross Domestic Product (GDP). This GDP impact can be separated into a direct impact of KSh 152.7 billion, an indirect impact of KSh 94.7 billion, and an induced impact of KSh 302.4 billion according to its latest data.
The total economic impact of the KSh 36 billion capital expenditure in Safaricom resulted in a total estimated GDP contribution of KSh 20.4 billion. The overall impact on the economy can be subdivided into a direct impact of KSh 8.5 billion, an indirect impact of KSh 3.3 billion, and an induced impact of KSh 8.6 billion.
By virtue of Safaricom’s significant expenditure, a large amount of economic activity has always been generated in the Kenyan economy. Its direct expenditure and indirect GDP creation as a result of suppliers’ expenditure related to providing Safaricom with goods and services have boosted the economy of this country.
Through, MPESA, Safaricom’s financing, and microfinancing service, it is currently processing up to 21,000 transactions every minute and provides access to two mobile-based loans every second, financially empowering Kenyan’s from all backgrounds.
MPESA has over the recent past played a significant role in ensuring that money circulation with the economy remains steady. A fluid money circulation will ensure the price stability of major products across the country, as those with excess will easily transfer their excess cash to friends and family members, no matter how far the two groups of people are separated.
The ease with which money circulates in an economy helps bridge the gap between the rich and the poor, and this means that it’s not just the rich that get the much needed economic opportunities. Thanks to MPESA, there have been millions of several micro, small and medium enterprises created across the country that have ensured livelihood to millions of households. If data to support this assertion is unavailable, the immediate micro, small and medium size enterprises created by MPESA are the over 100,000 agents spread across the country.
Read Also: Twende Tukiuke – A roadmap for transforming Safaricom into a purpose-driven enterprise
