Fertiliser subsidy project ignites fresh turf war between Safaricom, Equity

The fertiliser subsidy programme is likely to lock out Equity Bank from one of its core client bases in Kenya —farmers. PHOTO | TEA GRAPHIC 

By SPECIAL CORRESPONDENT, The EastAfrican

In Summary

• Under the scheme, farmers will receive electronic vouchers on their mobile handsets to be redeemed at appointed stockists for discounts on prices.
• The fertiliser subsidy programme came in the week that Equity Bank received approval from the High Court to go ahead with its thin Sim technology, an interface that will see the bank provide mobile phone services and money transfer services.
• Both Safaricom and Equity have mastered the art of making money off the common man. Unlike their rivals in each of their respective industries, Safaricom and Equity Bank packaged their products to fulfill the needs of the common man.
• Equity and Safaricom are also fighting it out for turf in the transport sector, where they have separately launched pre-paid fare cards.

The appointment of Safaricom to drive the Kenyan government’s fertiliser subsidy programme has opened yet another front in the turf wars between the telco and its erstwhile partner Equity Bank.

Under the scheme, farmers will receive electronic vouchers on their mobile handsets to be redeemed at appointed stockists for discounts on prices. Presently, subsidised fertiliser is distributed through the National Cereals and Produce Board of Kenya, but hardly reaches the intended beneficiaries due to corruption.

The two financial service providers fell out in 2007 over the sharing of profits in M-Kesho — the first mobile phone banking application in Kenya — and have been competing aggressively ever since.

The fertiliser subsidy programme came in the week that Equity Bank received approval from the High Court to go ahead with its thin Sim technology, an interface that will see the bank provide mobile phone services and money transfer services.

The fertiliser subsidy distribution system will benefit “over 3.5 million smallholder farmers across the country,” according to Sicily Kariuki, the Principal Secretary for Agriculture.

Agriculture contributes a quarter of Kenya’s GDP and the country has an estimated population of about five million smallholder farmers. Agriculture is the livelihood for most of these farmers.

This means that the fertiliser subsidy project could help Safaricom lock in close to five million clients on its network. For farmers to enjoy the subsidy, they must have the voucher entitling them to a discount. These vouchers will be distributed through the Safaricom mobile phone network.

Safaricom has cautioned most of its clients against the use of the overlay Sim technology set for rollout by Equity Bank after a drawn-out legal tussle and successful pilot, saying it comes with the risk of data breach.

The thin Sim technology eliminates the need for a user to buy another phone by enabling the sticker Sim to be placed over the existing one.

This enables handset owners to make and receive calls from the Equity Bank mobile phone service while enjoying other value added services that the bank will offer through the line. Of note is that the lines will ride on the Airtel network, Safaricom’s nearest rival in the Kenyan market.

READ: Equity-Airtel deal steals Safaricom’s thunder with money-transfer platform

“We already have 800,000 accounts and I’m optimistic we’ll have five million Sim cards issued by year end,” James Mwangi, chief executive officer of parent Equity Group Holdings, said during an interview at the World Economic Forum on Africa in Cape Town.

Equity Bank started out as a building society with the primary focus of helping farmers — at the time in central Kenya — to save and access financial services. It is from this wide base of farmers that Equity Bank has built its business.

And as the bank launches its mobile phone service, reportedly at a cheaper calling rate and also than Safaricom’s, it would want to retain the farmers — some of whom have stayed with the bank for decades — on its network.

After the divorce with Equity Bank seven years ago, Safaricom has been deepening its partnership with other banks without entering into exclusive agreements as was the case with M-Kesho.