How airtime cash is taking over control of your wallet

NAIROBI, KENYA: Kenya is virtually a talking nation. A stroll along Nairobi streets is met by men and women - young and old - engrossed in their phone call.

And as a young man momentarily stops at the sidewalk of Muindi Mbingu Street, both his thumbs mechanically typing on his mobile phone. Without plucking his eyes - and probably his mind as well - from the screen, he intuitively crosses the road.

A teenage girl talks animatedly - her earphones plugged to a mobile phone in her pocket.

She is closely followed by a man, probably in his 50s, who keeps referring to a strip of charred paper in his hand while talking to someone on the other end of the line.

A middle-aged man hurriedly crosses the busy road without taking the phone away from his ears…. Just about everyone you pass on any street in Nairobi’s Central Business District is riveted on their mobile phone.

And those who are not, will probably do so as soon as they settle down - at their workstations, in a matatu or the comfort of their homes.

Between July 2016 and June last year, Kenyans spent a total of 75 billion minutes talking on their mobile phones, or 143,086 years. They sent a total of 55.2 billion SMSs during this period.

Mobile phones

This means that for the entire year, the average Kenyan spent a total of two days just talking on their mobile phone.

This new mobile phone craze has sneaked its way into the cost of living basket, technically known as the consumer price index (CPI), which policymakers now consider a serious expenditure for most individuals and households.

The mobile phone craze is oiled by airtime. Most Kenyans are working hard to load airtime on their phones just as they are working hard to ensure there is a roof over their heads or food on their table.

Less than 20 years ago, airtime was a luxury.

Today, it is a need that most Kenyans can’t do without. Prof Bitange Ndemo, a former Permanent Secretary in the Ministry of Information and Communication and currently a senior lecturer at the University of Nairobi, says that airtime is no longer a luxury. If anything, he adds, it is a matter of “life and death” for some individuals.

“Airtime is so critical,” says Prof Ndemo. “Some people are using the airtime to call so they can find a kibarua (menial work).”

Airtime is increasingly taking up a huge chunk of Kenyans’ expenditure - at times, more than health or education, going by the weights attached to the three consumer products by the Kenya National Bureau of Statistics (KNBS), which is responsible for the development of the CPI.

Today, almost 90 per cent of communication by Kenyans is mobile phone-based - from checking their bank account balance (a service charged on airtime) to borrowing from mobile apps such as Tala (which needs data, and most of which is bought using airtime).

For mobile phone addicts to stay connected, many of them are leaving a hole in their coffers while pouring billions of shillings into their mobile service providers.

And so it did not come as a surprise when Safaricom reported a massive Sh55.4 billion net profit, a number which has been rising steadily over the last 10 years.

Airtime contributed a lion’s share of Safaricom’s revenue in the period ending March 2018, with sales from outgoing calls, SMS and mobile data earning the Nairobi Securities-listed firm about Sh143.5 billion, or 64 per cent of the firm’s revenue.

Safaricom’s revenue from airtime exceeds the combined market value of all final goods and services produced in 2016, or gross domestic products (GDP) of three countries - Sao Tome and Prince Sh34.2 billion ($342 million), Comoros Sh61.6 billion ($616 million) and Tonga Sh40.1 billion ($401 million).

Revenue from airtime alone excluding that from M-Pesa, a mobile money transfer service - and fixed data made Safaricom richer than Guinea Bissau with a GDP of Sh116.4 billion, Grenada (Sh105.6 billion), and Gambia (Sh96.4 billion).

Kenyans will buy airtime, even when the economy is in dire straits, literally. This explains why East and Central Africa’s most profitable company, which controls over 85 per cent of all the telecommunications services, is never affected by economic downturns.

The Sh55.4 billion net profit comes against a constrained business environment last year that saw almost all sectors record a decline. However, excise revenue from airtime rose 3.8 per cent to Sh16.1 billion last year from Sh15.4 billion in 2016.

The economy, however, grew at a slower pace of 4.9 per cent, the slowest pace in five years.

Low-income Kenyans

It is no doubt that some Kenyans would rather forego expenditure on food and other essential expenses so as to buy airtime, according to a 2012 case study of mobile usage among low-income Kenyans.

“One in five respondents interviewed had foregone some usual expenditure in order to reload their phone with credit,” read part of the study commissioned by World Bank.

The respondents who sacrificed usual expense to buy airtime, forewent as much as Sh999 per week, according to the study.

“The most common expenditure foregone was the purchase of food, followed by the purchase of bus fare. During the focus group discussions, it emerged that the meals forgone were sometimes entire meals, meals for the family, or were cheaper meal options chosen,” said the report.

Safaricom has been quick to exploit this airtime-craze, consistently coming up with new products aimed at nudging subscribers to spend more on airtime.

About a third of Safaricom revenue on airtime, or about Sh43.5 billion, was earned through Okoa Jahazi, a service that lets subscribers access airtime on credit.

As an article in one of the dailies put it in 2016, Okoa Jahazi’s loan book is more than that of tier three and tier four commercial banks.

Since 2009 when Safaricom unveiled airtime lending service, other network providers have followed suit.

Airtel Kenya launched Kopa Credo, which also allows subscribers who run out of airtime to request for it and pay back on their next recharge within a specified period.

Telkom has Pewa Emergency Airtime which is available to its prepaid subscribers at service charge of 10 per cent.

With seven out of 10 people using mobile phones, according to data from Communications Authority of Kenya (CA), buying airtime to keep their mobile phones active has become as important as buying food, paying for rent, electricity and water.

Today, a typical Kenyan household’s expenditure on airtime ranks at par with or higher than spending on health and education, according to calculations done by Financial Standard.

For the middle class in Nairobi, expenditure on airtime dwarfs their spending on such foodstuff such as milk, bread, maize flour, tomatoes, sugar, and beef combined.

Spending on airtime, to Nairobi’s middle class, is only second to paying rent. However, this group of consumers find loading airtime into their phone to can make calls, text and to browse the Internet, a priority than even investing in their health. A middle class individual in Nairobi will spend less on household maintenance such as buying a new household item or generally refurbishing their house compared to airtime. These individuals are also spending more on airtime than petrol.

Kenyans of all income levels countrywide will put as much money on airtime as they will invest in their education and health, with the national statistician attaching a weight of three for each of these consumer items.

For most Kenyans, only rent, beef with bones and matatu fare are worth more than airtime.

Not even a combined expenditure on beer, spirits, muratina, busaa, and cigarettes beats airtime which until 2010 was not included in the CPI.

With more services being shoved to the mobile phone - and with the biggest telco said to be burning the proverbial midnight oil to unveil 5G Internet - the Safaricom’s profits are going to get unbelievably bigger.

Mobile phone activities have increasingly been shifting from traditional telecommunication services of calling and SMS to data. Going forward, airtime sales will be driven more by use of mobile data than outgoing calls and SMS.

The young man, at the start of this article, who cared less about safely crossing the road than finishing typing a message on his mobile phone was most likely chatting on popular messaging apps - Whatsapp, Instagram, Facebook Snapchart, Messenger or Twitter.

Today, Kenyans are not just buying items on their phone, they are also borrowing.

There are currently over 25 digital credit providers, with new services being launched continually, according to a recent report by online marketplace Jumia.

An FSD report, titled the Digital Credit Revolution in Kenya, done in partnership with KNBS and Central Bank, estimates that there are about six million unique digital borrowers in Kenya.

Such loan apps in the market include Branch, Tala, Okoa, Saida, Zidisha.

A recent study by FSD found that it is the middle class in Nairobi - aged 26 and 35 years - who are not only actively using their smartphones but are also loading airtime into their phones so they can buy Internet bundles and borrow online.

They are a little restless and reckless and most are men with a college education. At least five per cent of them will borrow just to try out mobile lending.

These digital borrowers tend to live and work in major urban centres; they are neither farmers nor dependents of their families or Government.

Some have businesses of their own, though not large enough to afford them a luxurious life. Although it is difficult to determine, Safaricom revenues must have been shored up BY the growing popularity of gambling.

Spending on airtime

In a way, the increasing expenditure on airtime has to a number of Kenyans, become like an investment.

Elisha Reru is an insurance agent whose star in this field has risen in tandem with the number of calls he has made.

Today, Elisha spends about Sh5,000 to make calls to clients monthly.

“When you have airtime on your phone and take your time speak to a client, you are more likely to win the business,” he says, noting that his spending on airtime has risen over time.

Prof Ndemo says he remains opposed to the introduction of taxes on airtime which Treasury effected in 2015.

He says the policy is counter-productive.

He explains that the Government generates more in income as a result of increased economic activities triggered by more people calling. 

“Most policymakers do not understand the impact of communication,” he says.