In a year defined by the global economic slowdown and financial market uncertainty, Vodacom Group has delivered a satisfactory set of results, showcasing the resilience of our strategy and our track-record in adapting quickly to changes across operating environments. Given the numerous external pressures, it is particularly pleasing to have delivered a 17.2% increase in Group service revenue (up 7.2% excluding Vodafone Egypt) with net profit up 2.1%.
The war in Ukraine, which followed hard on the heels of a global health crisis, resulted in supply-chain disruption and inflationary pressures. These factors have contributed to a higher cost of living, a sharp rise in interest rates and foreign exchange rate volatility across our markets.
Guided by our purpose-led approach, we responded by absorbing inflationary pressures where possible and sought to deliver even greater value to customers in an attempt to assist more vulnerable communities impacted by economic hardship.
At the same time, we diversified and accelerated our growth profile by completing the acquisition of a 55% stake in Vodafone Egypt for R43.6 billion, the largest acquisition in the Vodacom Group’s history and one that expands our population reach to over 500 million people across Africa. Since consolidating Vodafone Egypt on 8 December 2022, it has contributed R8.0 billion to Group service revenues, prompting an upgrade in the Group’s medium-term service revenue and EBITDA growth targets.
The Group remains committed to spending 13% to 14.5% of its overall revenue on capital expenditure that ultimately results in an enhanced customer experience through sustained investments in technology and network infrastructure.
A prime example of this promise is the pledge made at the recent South Africa Investment Conference of R60 billion of capital investment over the next five years in South Africa alone having delivered on a R50 billion pledge made in 2018 over the previous five years. These substantial investments have and will contribute significantly to enhancing network resilience to keep customers connected through the likes of elevated levels of loadshedding, the acceleration of 5G coverage, as well as our rural coverage programme to help bridge the digital divide.
Vodacom responded to South Africa’s power crisis with increased investment in power resilience, which has ensured network availability and contributed to an accelerated demand for data, up 45.4% in the fourth quarter. The sustained levels of loadshedding has been disastrous for the South African economy and the industry as a collective. Since 2020, Vodacom South Africa has spent over R4 billion in back-up power solutions such as batteries and generators and a further R300 million in the past financial year on additional running costs in the form of diesel, security and maintenance.
We remain confident that the ‘virtual wheeling’ pilot project that we’re pioneering with Eskom, South Africa’s power utility company, will be signed off in the near term and that this will have a significantly positive impact on the country’s power grid and ultimately on the over 20 000 towers across the industry that require reliable power supply to operate optimally.
The power crisis in South Africa, higher interest charges, Ethiopia start-up losses, M&A costs and higher inflation across our markets weighed on net profit growth of 2.1%.
In South Africa, financial services continue to grow at a double-digit rate, supported by our insurance portfolio and Airtime Advance product. I am particularly encouraged by the traction and transaction volume growth that our VodaPay super-app continues to attract through its 5.7 million downloads and 3.3 million registered users. In the coming year we will scale lending, insurance and payment products, including cash-in and cash-out, while creating new business cases for remittances and wealth management. Our digital services, fixed and IoT businesses were also solid performers while wholesale revenue pressures and a strong prior year saw Vodacom Business’ service revenue decline marginally by 1.7%.
Our International operations in DRC, Lesotho, Mozambique and Tanzania produced good growth, underpinned by a 31.1% increase in M-Pesa revenue and a 33.2% rise in data revenue. As expected, start-up costs associated with Safaricom Ethiopia has curbed Safaricom’s contribution to Group operating profit to R2.8 billion, 9.8% lower than last year. Pleasingly, Safaricom Ethiopia was recently awarded a mobile financial services licence, representing another important milestone in our ambition to transform lives in the country.
Financial services is the key contributor to our new services. This is evidenced by the 29.2% increase in Group financial services revenue to reach R9.9 billion, as we continue to scale our product suite for consumers and merchants. Our International merchant sign-ups increased three-fold in the year, helping us expand our addressable commission pool beyond peer-to-peer payments and withdrawals into both online and offline commerce. We remain Africa’s largest mobile money platform by transaction value with M-Pesa now processing an impressive US$364.8 billion in the year.
Our proposed purchase of a joint venture stake in South African fibre company MAZIV is expected to assist in narrowing the digital divide by enabling affordable access to connectivity in some of the most vulnerable parts of the country through an ambitious fibre roll-out programme. The joint venture will house the material fibre network assets of Vodacom South Africa and CIVH and having received ICASA approval in October last year, subject to conditions, the transaction remains subject to the Competition Commission’s ongoing approval process.
Of the many purpose-led initiatives that we led over the past year, I am particularly proud of our ‘Code Like A Girl’ programme and m-mama programmes. ‘Code Like A Girl’ tackles low representation of girls in Science, Technology, Engineering and Mathematics (STEM) education and to get more girls into careers that require coding skills, or to help them get a start as STEM entrepreneurs. Introduced in 2017, we have ramped up efforts this year – particularly in South Africa, Mozambique and Lesotho – and is an investment that contributes to building a more digital, inclusive, sustainable future on the continent.
M-mama is a mobile healthcare service that provides emergency transport for pregnant and post-partum women in Tanzania, which has one of the world’s highest maternal mortality rates. M-mama is expected to save the lives of around 17 000 mothers and babies over the next five years, emphasizing what the right partnerships and digital solutions can achieve. Beyond Tanzania, we are working with the Vodafone Foundation and USAID to expand m-mama to more markets in Africa, having already launched it in DRC and Lesotho.
Looking ahead, the operating environment that we face requires an unwavering focus to deliver our strategy, to meet our business objectives and to serve our customers. We continue to ensure that we have the right measures in place – including our commercial initiatives and cost efficiency programmes – to help mitigate the impacts from the global macroeconomic risks.