We create value for all of our stakeholders through the products and services that we make available. A portion of this is monetized through income generated for the company. Although appreciated and recognised by internal and external stakeholders alike, the value contribution we make to the economy, society and environment in Kenya is signiﬁcantly more than this.
Using a pioneering assessment carried out in partnership with KPMG, we have been able to measure and report on this contribution that we make which has, until now, not been valued. We have used the KPMG “True Value” methodology to identify the most material socio-economic and environmental impacts of the company and to quantify them in ﬁnancial terms.
The net value of the monetised positive and negative externalities gives an indication of the total value that the company created for the people of Kenya. We released our ﬁrst True Value report for FY15 and have now updated the results for the year ending 31 March 2016, which are included in the following ‘True Earnings’ bridge infographic.
Monetisation is fast gaining momentum as an approach that helps companies to understand and increase the value they create for society. Safaricom is the ﬁrst major company in Africa to publicly communicate the value it creates for society in this way.
SAFARICOM TRUE VALUE BRIDGE:
The Safaricom true value bridge shows that the total value we created for Kenyan society in FY16 was KSh 414 billion, around 10.86 times greater than the ﬁnancial proﬁt the company made.
The True Value assessment shows that Safaricom sustained over 182 883 direct and indirect jobs during the year and, if the wider effects on the economy are included, this number increases to over 845 846 jobs.
The FY16 value bridge estimates that the total value Safaricom created for Kenyan society was 10.86 times greater than the ﬁnancial proﬁt the company made during the same period. This has been an increase from FY15 which was 10 times. This can largely be attributed to the growth in the number of customers, the wider range of products and services available to customers and the growing network.
For FY16, another element was also included in the calculation. This is the ‘Social Value of Jobs’, which considers all of the direct and indirect jobs created by the operations of Safaricom and values the social value — over and above their salaries — created for people whose employment is linked to Safaricom.
The company creates the greatest value for society through the added economic value it generates from its operations and capital expenditure, along with the positive social impacts created by its M-PESA mobile money transfer service.
How value is created and eroded
Safaricom’ s contribution to the Kenyan economy, which takes into account both economic value generated and tax paid, amounts to KSh 249 billion. If the wider effects on the economy are included, this number increases to KSh 383 billion, approximately 6 percent of the Gross Domestic Product (GDP) of Kenya. The Capital Expenditure of the company in the period created Ksh 15 billion in direct and indirect value, and Ksh 27 billion with the wider effects on the economy.
This value is eroded by corruption in the Kenyan economy. This is not directly related to the operations of Safaricom, but the assessment acknowledges that corruption is likely to prevent some of the economic value that Safaricom creates from reaching the intended recipients.
The greatest contribution to Social Value is M-PESA. The social value created by M-PESA in FY16, excluding transaction fees, has been calculated at KSh 184.5 billion. This is 4.45 times the total amount of transaction fees earned by Safaricom in the same period and means that, for every M-PESA transaction that takes place, KSh 67.36 of value is being created for Kenyan society.
It is interesting to note that, while the signiﬁ cant contributions of the M-PESA and Safaricom Foundations create tangible social value, this is small in comparison with the impact of M-PESA, illustrating the power of the operations of a company in creating positive social impact.
The new addition of the social value of jobs is also less signiﬁcant. This is largely due to the fact that: a signiﬁcant portion of employment value is captured economically (through salaries); Safaricom cannot take full responsibility for indirect jobs as a number of them would exist without Safaricom; and a signiﬁcant portion of direct employees would be able to ﬁnd employment elsewhere, if necessary.
Health and safety incidents that take place as a result of the operations of the company are the only element that erode social value.
The nature of the operations of Safaricom mean that negative environmental impact is minimal; however, carbon emissions from fuel electricity consumption, as well as the consumption of water do reduce the value created. This is mitigated to some degree by activities at Safaricom such as water and electricity saving initiatives, as well as recycling projects.