Kenya's Mobile Gold Mine

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Gideon Mendel / Action Aid / Corbis

A hawker sells mobile phone covers in a street market in Lagos, Nigeria.

Over the last month, Kenya was gripped by the kind of fever usually seen only when a Mega Millions lottery jackpot creeps past the $100 million range. In the aftermath of the country's violent political spasm, the mania was perceived as a sure bet on prosperity: the initial public offering of East Africa's most profitable company, the mobile phone service provider Safaricom.

There is real reason for excitement. Much to the surprise of technology analysts, Africa is the fastest-growing mobile phone market on the planet and Safaricom has profited handsomely by catering to customers who don't have a lot to spend. In 2007, the company's pre-tax profit was $370 million, making it what was believed to be the most successful company in the continent outside South Africa. The more stunning figure is its subscriber base — which grew from less than 20,000 in 2000 to about 10 million today, upending the conventional wisdom that sub-Saharan Africans, especially in places like Kenya where income averages out to a dollar a day, had no interest in a mobile phone.

The IPO has injected another kind of novelty into the region: stock fever. The newspapers were filled with ads offering loans — usually with exorbitant interest rates — to help Kenyans buy shares. Poor people who didn't even have bank accounts complained about a minimum investment requirement of 10,000 shillings (just over $150). And on the first day of the IPO, thousands of people lined up in downtown Nairobi to snap up shares. It was perhaps most emblematic that one Kenyan newspaper the Daily Nation, referred to potential investors as "punters," as if by buying Safaricom shares they were betting on a racehorse, or a particularly promising poker hand. "There has been a lot of education, people are now aware of what it means to own shares," said Rina Karina, a corporate finance and research analyst at Faida Investments, which helped orchestrate the IPO. "But even there, the reason for the purchase of the shares is not for long-term investment but more for quick gains."

At the very least, Kenyans know what they are betting on. Thanks to a proliferation of cheap handsets and pay-as-you-go services, it seems that practically every Kenyan has a mobile phone, and most who do are Safaricom customers. The company has made its buck by thinking small, allowing Kenyans to buy airtime in increments as little as 20 Kenyan shillings — about $0.30. It has found success by focusing on ways that even the simplest mobile phones can change people's lives. Airtime credit can be traded as currency and Safaricom also has a feature, called M-Pesa ("pesa" is Swahili for money) that allows people to use their mobile phones for money transfers.

The Kenyan government is in for a windfall. The government owns 60% of Safaricom, and 25% of that stake is up for sale. With Safaricom shares starting at seven U.S. cents, that means the government could make 50 billion shillings — about $780 million — on the sale.

Yet this being Kenya, one of the most corrupt nations on Earth, the Safaricom offering has raised the suspicions of the country's business bloggers. The Kenyan opposition says the sale violates Kenyan privatization laws. And they're worry that other powerful Kenyans may be behind a Guernsey-based company called Mobitelea, which owns a stake in Vodafone Kenya, which in turn owns 40% of Safaricom. Of these allegations, Michael Joseph, the CEO of Safaricom, told the Daily Nation, "I hope they do not detract potential investors from investing in a very strong company with strong growth prospects." Joseph said that confidentiality agreements prevent him from revealing the names of the owners of Mobitelea but that the IPO is fully legal.

About 35% of the shares will be up for sale to investors abroad, making some Kenyans grumble that rich foreigners — or rich Kenyans with foreign bank accounts — would profit off the sale. "It's just another advantage to the rich, who will keep their millions and millions," says David Mutua, 27, a security guard. Still, the IPO was so popular among ordinary Kenyans that even opposition leader Raila Odinga, who narrowly lost a disputed presidential election to incumbent Mwai Kibaki in December, had to dial back his distaste for the offering. Once he realized that the sale would go ahead, it became obvious that standing in the way would be deeply unpopular among supporters who wanted to invest. "Mr. Odinga has always supported the privatization of Safaricom but has objected to secretive manner in which it was conducted," Odinga spokesman Salim Lone said. "He did not want his supporters not to buy something that other people in the country — poor people with 10,000 shillings to spare — were going to be buying."

The IPO could be a welcome boost for the economy, which suffered a major blow from the nationwide turmoil sparked by the election dispute. At least 1,000 people were killed in the violence, and on Wednesday, Finance Minister Amos Kimunya said the economy would almost certainly slow down in 2008 because of the crisis. At a gala event to launch the IPO, Kibaki portrayed the offering as a step in the healing process, and urged Kenyans to "take advantage of this investment opportunity and take part in the success story that we have created together."