Even in market activations, KPMG auditors did not approve of payments by Safaricom to the seven contracted firms and flagged singe-sourcing in the choice of these marketing firms, terming them “subjective.”
Safaricom ended up paying hundreds of millions for work not done, thanks to its managers who okayed the payments either without checking the work or were compromised to do so.In this segment the auditors focused on MoSound Events, EXP Momentum, Jayden Ltd, Impulse Promotions, Neo Marketing Ltd, Roundtrip Ltd, and Alfones Communications. These companies were awarded lucrative roadshow marketing tenders “on the basis of preference” in what looks like deal-making by managers in charge in conjunction with the owners of these agencies.
Even then, Safaricom is not sure whether these firms actually delivered what they had been assigned to do and just paid money without any proof. Purchase orders worth Sh1.2 billion were issued for the two year review period but the mobile operator has little to show for it. These vendors provided additional services such as sales promotions and office event facilitation over and above the activations.
Ms Grace Kihara, the Principal category Sourcing Officer, told auditors that in the period under review, it was not possible to determine the actual spend on activations as the different services provided by these vendors were not booked in the Oracle system using unique codes. Currently, the activation spend can only be monitored manually.
“Safaricom did not have a mechanism of recording delivery of services by the activation agents thus leaving no audit trail for review,” noted KPMG in its report.
According to the audit, Mosound was paid the largest amount, totaling Sh330.9 million, EXP Momentum Sh301.5, Jayden 171.6 million, Impulse Sh164 million, Neo Sh146 million, Roundtrip Sh87 million and Alfones Sh2.9 million.Safaricom conducts activations to drive awareness and acquisition of various products through activation agencies.Mr Franco Opanga, the brand experience manager at Safaricom, said activations are initiated independently by various users drawn from various units across the company. In what exposes this structure to abuse – such as running unnecessary activations or even not-well-done projects or logging in of dummy activities – the users handle their activations without or with minimal involvement of the brand experience team.
Confirmations of successfully undertaken activations were until May 2015 not documented and it’s not clear whether what was paid for was actually delivered.This happened yet Safaricom’s Marketing and Activations Procedures stipulate that after an activation has been done, the vendor is required to provide a detailed report on the activity complete with pictorials, customer feedback, challenges faced and recommendations within 24 hours. This should then form the basis of payment, but agencies were paid without this critical evidence of work done. This means managers approved payments without due diligence.Neo, which is reportedly owned by Martin Kibaki, John Mbiu Caroline and Andrew Kamweru, according to the audit, fulfilled contract requirements and a visit to nine sites confirmed that the activations were undertaken for the Sh136.7 million paid. Mosound too did meet its side of the bargain, as did Alfones and Impulse.
Problems were pointed out at Jayden, which is co-owned by Winnie Chege and Peter Mugo, a former regional sales manager for Safaricom. Mugo worked for Safaricom between 2001 and 2007. According to the audit report, the company was engaged to provide activation and roadshow services. Out of the 35 activation events, four did not take place but were nonetheless paid for by Safaricom. The ‘Shinda A Home’ mall activation was to promote usage of Lipa na M-Pesa in malls.
“We visited Safaricom Shop at Galleria on 14 December 2015 and spoke to personnel who informed us that the activation did not take place at Galleria, Junction and Prestige malls,” the audit report says. Incidentally, Jayden was paid Sh2,258,219.86 for these three activations.
Roundtrip, owned by Scangroup, too shortchanged Safaricom as three out of the 16 activation sites to promote usage of new daily bundles were not undertaken. EXP Momentum did not deliver in three sites out of 10.
The Scanad question
Apart from raising the red flag on the payment of Sh2.1 billion to Scangroup, the audit report points out that even the appointment of Scanad to provide marketing services was itself flawed. It notes that selective tendering was used to pick Scanad, based on four key considerations which included, among others, ability to deliver both above the line and below the line marketing, financial capacity to handle Safaricom’s huge spend and strong worldwide partnership with international network.The firms that responded but were rejected include Red House Group, Nurturn bates, Express DDB, Transcend Media, and J Walter Thompson Kenya Ltd. Although Transcend Media was ranked first during the technical and commercial analysis, it was not selected.
The audit indicates that Scanad often falls short on its promised deliveries and either explains the causes of delay or hides under the 24-hour grace period provided for under its service agreement. “In the three months period considered,” says the report, “Scanad delivered late on 10 occasions but only accepted to be penalised on one occasion due to shortcomings on their part.”WPP Scangroup defended its dealings with Safaricom. It explained that the Sh2.1 billion it was paid by Safaricom was done in the course of normal business and are not disputed.“The money was for media acquisition over a period of two years and production costs for radio and TV advertisements, among other items, such as model fees, photography and agency fees,” it said in a statement.
According to Scangroup, its involvement in Safaricom affairs can be traced to December 2013/January 2014, when it participated in a tender process for creative and media services, and its credentials as a global public relations and communications giant earned it the tender.
The tender was for a period of one year with the option of an extension for a period of two years, which was granted in 2015.The Nairobi Security Exchange-listed firm also indicates that in total, it earned Sh33.7 billion in the period 2014/14 from its clients for similar services.
Kaon Media, which supplied set-top boxes to Safaricom, is said to have delivered products that had “technical deficiencies”.
