Plunged into a severe recession, accentuated by the health crisis and the sharp drop in oil prices, Algeria could be forced to resort to external debt. Anxious to preserve its sovereignty, Algiers has so far excluded all financing from the International Monetary Fund. But it may better to go early, while it still has room to negotiate terms.
Vodacom boasts a boost in international portfolio across Africa
Vodacom’s international portfolio remains a standout performer and delivered double-digit growth for the group in the year ended 31 March 2020.
“An additional … [four million] customers and increased demand for data and M-Pesa services contributed to a 12.5% increase in service revenue across our international operations,” said Vodacom Group CEO Shameel Joosub in a note to the market announcing the telecoms group’s financial results.
In the year under review:
- Vodacom revenue was R90.7bn.
- The group posted operating profit of R27.7bn.
- The company declared a final dividend of 405c per share.
Ecosystem bolsters growth plans
The M-Pesa ecosystem alone has enabled customers to generate transactions worth more than $14.7bn a month, according to the Johannesburg Stock Exchange-listed company.
A total of 40 million people use M-Pesa in markets including the Democratic Republic of the Congo (DRC), Ghana and Egypt. This use brought in R16.2bn in revenue for Vodacom.
Furthermore, the platform’s revenue is growing at a rate of 22% a year.
Through its newly created joint venture with Safaricom, Kenya’s largest mobile telco, Vodacom wants to capitalise on the M-Pesa growth by introducing new products and expanding the scope of the platform.
The new products include nano lending platforms and configuring the M-Pesa system for smartphones. In terms of the latter, Vodacom wants to bring in more partners on board.
In Kenya and Tanzania, 17 million people are already using Vodacom’s nano lending platform.
Micro gains at home
In South Africa, Vodacom’s home terrain, there is no M-Pesa. However, the company has made inroads in micro-lending by rolling out financial products through its wholly owned subsidiary, Vodacom Financial Services.
The financial services unit, whose products include airtime advances and insurance, generated R2bn in revenue for Vodacom, representing a 21.5% increase. In the period under review, Vodacom advanced R9.9bn in airtime to 9.9 million customers.
At present, Vodacom is the only telco in the world that has its own insurance licence.
Debt not a factor
Although the company acknowledged it as operating under uncertainty amid the COVID-19 global pandemic, it expressed confidence in its ability to weather the crisis.
“The strength of our balance sheet allows us to lead our business through volatility and certain levels of economic downturn expected over the short-to-medium term,” it said.
Furthermore, Vodacom has a low gearing ratio, its short-term debt repayments are limited and 90% of its debt is rand denominated.
In addition to having limited foreign currency exposure, Vodacom’s liquidity remains strong because it is not facing a large debt repayment burden in the short term.
But the company is facing regulatory challenges in Lesotho and Tanzania.
In Lesotho, Vodacom is awaiting a final outcome from the Lesotho Communications Authority (LCA) about whether the company can retain its communications licence in the country.
Vodacom came in the LCA’s crosshairs after the authority alleged the telco’s external auditors are not independent.
“In March 2020, following several engagements with the LCA, Vodacom Lesotho made written representations against the revocation [of] its licence. The LCA is yet to issue a final decision on the matter,” notes Vodacom.
In Tanzania, Vodacom is grappling with the re-registration of millions of customers following a government directive that telcos implement a biometric system to register clients.
Back home, Vodacom is involved in COVID-19 relief efforts.
The company has partnered with Discovery Health to establish an online healthcare platform “to help citizens understand their personal risk for COVID-19 and to schedule free healthcare professional consultations.”
Vodacom is also working with the national department of health to distribute 20,000 smartphones pre-loaded with free voice call minutes and data for use by health workers. The devices will enable the collection and transmission of data in real time. This will help the government’s efforts to conduct mass testing for the coronavirus.