Safaricom halves suppliers as spending breaches Sh100bn

Safaricom CEO Peter Ndegwa during an interview on October 5, 2023 at Michael Joseph Centre, Nairobi. PHOTO | BILLY OGADA | NMG

Safaricom more than halved the number of suppliers in the six years to March this year despite the total procurement spending on local and foreign businesses crossing the Sh100 billion mark.

The telco has disclosed in the latest sustainability report that it closed March with 720 suppliers, marking the sixth straight month of reduced number of businesses trading with Kenya’s most profitable company.

The 720—made up of 550 local and 170 foreign—was a drop from last year’s 799 and a 62.8 percent decline from the high of 1,172 in the financial year ended March 2017.

Safaricom links the dropping number of suppliers to consolidation, even as it continues to ramp up spending, which grew to Sh102 billion from Sh94.6 billion.

Read: Will Safaricom’s new revenue streams outpace fall in Kenya?

“As the total supplier and spend table indicates, the number of suppliers has decreased in line with our strategy of consolidation,” says Safaricom in the latest report.

The 550 local suppliers accounted for Sh64.81 billion or 63.5 percent of Safaricom’s total spending on goods and services, leaving Sh37.2 billion to foreign suppliers.

Safaricom, as part of its sustainability journey, has been tightening checks on its suppliers to, among other things, ensure it is dealing with businesses that uphold the health and safety of its own workers.

The telco, for instance, works with suppliers whose remuneration to workers is, at the very least, commensurate with the minimum wage, and provides personal protective equipment where necessary.

The push for high ethical and operational standards saw Safaricom put 12 suppliers on a performance improvement plan, with two of them getting lifted from this plan by year-end.

Safaricom says it has noted challenges such as the activation of medical cards, delayed remittances of statutory payment, implementation of the minimum wage and provision uniforms for pregnant staff.

“Our aim is to drive home an understanding of the need for compliance in the areas of human rights and labour laws. We are currently assessing ways of expanding compliance through consequence management,” says the telco.

Women-owned businesses have, however, been the winners despite the drop in the number of suppliers.

The telco has set a target to have women-owned businesses account for at least 10 percent of the procurement spend.

Safaricom data show the number of women-owned businesses that supplied goods and services has been growing year on year since 2018 and hit 237 last year or an equivalent of 8.5 percent of supplier base.

The procurement spend on women-owned businesses more than doubled to Sh5.92 billion or 5.8 percent of total procurement spend from previous year’s Sh2.38 billion.

“This is attributable to contracts awarded to WIB [women in business] in the technology networks category – an area of significant spend,” says the telco.

Safaricom in July 2018 put out a call for applications from women-owned businesses specialising in technology after noting that most of them were concentrated in relatively low-spend needs such as stationery supplies, cleaning and cafeteria services.

The telco has running memoranda (MoUs) of understanding with banks Absa Bank Kenya, Citibank Kenya, Equity Bank and KCB and is currently in the process of completing MoUs with two other banks.

The MoUs help its suppliers, including women, youth and people with disabilities, to access favourably priced loans based on purchase orders. Safaricom says its supplier financing grew by Sh6.1 billion in the year.

Safaricom, which has been in existence for over 25 years, is the largest listed firm on the Nairobi Securities Exchange (NSE) with a market capitalisation of Sh586.96 billion and Kenya’s most profitable.

The company last year grew its value in the economy grew by Sh182.3 billion or 25 percent to hit Sh909.5 billion compared with Sh727.2 billion a year earlier.

Read: Safaricom reveals plan to set up smartphone factory

The telco has since 2015 been using a structured impact modelling tool – the KPMG ‘True Value’ methodology – to quantify the positive and negative impact of the organisation on society, the environment and the economy.

Safaricom now targets deepening its sustainability agenda and grow into a purpose-led technology company by 2025.

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