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Marcopolis presents Kenya Report focused on topics such as investments, doing business, economy and regional integration, featuring interviews with Kenya's leaders. The sectors under review in this issue are agriculture, banking, energy, industry, telecom, IT, tourism, logistics and many more.
InterviewsJuly 09, 2019
Oxygen 8 Group Talks About Lottery, Gambling, Billing and Corporate Solutions in East Africa
Joan Mwaura, CEO for East Africa at Oxygen 8 Group
- Written by Sandra Francisco
- Published: July 09, 2019
Interview with Joan Mwaura, CEO for East Africa at Oxygen 8 Group
What is your assessment of the sector in Kenya? Is it very competitive?
The lottery space in Kenya is not as grand as we would like it to be. It is the largest lottery in East Africa now. The biggest headache for us now is that even with the regulators, there is confusion with them separating what is a lottery and what is sports betting. There are no fixed odds in a lottery. It is a game of chance, a probability game. However, we group the lottery, sports betting, and even bingo as one category. We have one Gaming Bill that is supposed to regulate that entire industry without breaking down the fact that the lottery is different and even how the game is played is different. That is our biggest challenge in terms of the industry. In terms of growth, the sector has a lot of potential. In terms of tech, the thing that has helped the Kenyan market most is M-PESA because it makes it so easy for people to play. We have moved the lottery from a time where people had to go by scratch cards to where now, you can play from anywhere, even the comfort of your house, on the web. We have tried to make the games as simple as possible. The lottery is 6/49 which is the standard around the world. If you win 6 numbers plus a bonus, you win 1 million USD or 100 million Kenyan shillings. When we launched, we had the biggest jackpot. But now, things have changed because the industry is growing and the jackpots keep growing. But we are the only lottery that has such a big prize because the rest of the ones that have such a big prize are sports betting. When you compare Kenya to established markets like the US and the UK, we have so much to do, even in terms of regulation. What do we do so that we ensure that no one below 18 is playing? M-PESA has helped with this, particularly because you need to be 18 to register and have your own line, and to be able to withdraw money you need an ID card, which you only get in Kenya when you are 18. There is also the proliferation of the games that were brought in by the Chinese. Those lottery machines that are taking on ground you will find even kids playing. But when the news comes out and they are talking about how they destroyed lotto machines, I will get tagged because they will say “lotto machines”. However, the lottery does not have games on ground, it is purely online, and they are not making the differentiation. We wanted to make it that way so that we are not targeting kids. Even if they are playing and they do win, they have to go to their mother, tell her they won, and then withdraw. The mother is able to control it that way. The reason why we also did mobile payments is because we wanted to be able to regulate the players. For the lotto, you need 50 shillings to play. If you play 10 times in one day, someone will call you. I need to know that you are not spending this money that you might actually need for something else on this game. We try and make it as difficult as possible for you to spend too much. It is not good for the business when I sit in my Board of Directors. There is the corporate social side, but there is also the business side. What people do not understand is, I would rather have someone playing every day but playing once, rather than putting all their money in and if they do not win, they are gone. That means I have taken a chunk, but they are gone forever. I would lose a customer who has a potential lifetime value. The lottery is growing and we are hoping to change the face as it is. The headlines keep changing and you will find even suppliers who are abroad will panic. They see that betting is going to be shut down. If you are here, it is not what is actually being said. Most of the time, it changes. It is an industry that has grown too fast for the Kenyan market. We had not put regulations in place. Now, we are updating even in terms of the Board for them to be able to regulate their internet gaming. We took off so fast that we left the people who are supposed to regulate us behind in terms of technology. We did hold their hand and tell them how the game is played and what they need to be able to regulate. In that process, you get notions that come up that you have too much money or you are making so much and you are taking so much in, but they are not factoring the cost that goes into the business. My target market is not the youth who are unemployed because at the end of the day, you need to have 50 shillings to play. I am targeting that person who only plays for fun and not someone who plays like it is a job. You will not make your living from gambling. Changing that notion in the market is what has been the biggest challenge for us. Sometimes, we in the industry do not help. If I am the CEO and people see me with a flashy car, they feel that it is their money that I am taking. They will not see the hard work. They will only see me when I am partying, but not the work that goes on behind it. There is a tech platform that works 24 hours. We have a customer care base that works 24 hours, whether it is a holiday or not. You have a system that cannot fail. For things like our Tatua lottery, it is every 30 minutes. If there is a drop, then your numbers dip drastically. If I play and I do not get an instant message, it means that draw has passed. I do not get the time to resolve it like normal people have saying the system is down and we are working to resolve it and we will get back to you by the end of the day. We have 29 minutes to resolve that before the next draw happens. You have to get your results because you have put the money in. I would blame us as an industry at some level, but also the perception that is out there. It is our job to change that narrative.
The lotto also has an obligation in terms of investing money in charities. What is your policy on this?
We have over 70 people in the building now who are running different brands, not even counting the suppliers who rely on us. If we are able to grow and get to a point that the ship is steady, then we want to expand.
We are required to give a certain percentage of the revenues that we make to charity and to the community. We did not take a blanket approach where we just take money and give it out, but we do projects that we actually want to do. We founded the Lotto Foundation and put out four areas of focus so that we are not all over the place. We do sports, education, health, and community development. In terms of education, we mostly focus on infrastructure. Especially for the interior and the marginalized areas, you need to put up structures, classrooms, or something may have happened like a flood and structures were destroyed so you have to go in and help rebuild, or someone wants to start a new school because the distance between the area and the school is too far so you need to bridge that gap. In terms of health, we do some infrastructure but we focus more on the technology side. We get kids that can help the guys on the ground to do early detection for things like pneumonia, malaria, cancer. We are trying as much as possible to take on the tech because at the end of the day, we are a tech company. We try and get anything that is advanced that is not available locally or that is available locally but that has not been adapted for remote areas. For example, for pneumonia, before you had to go to a hospital to get tested, now, there are new machines where you can test even in remote areas. You can use solar which means you do not have to go to a big hospital to get tested. It is small things that actually make a change. I am biased with sports and I have focused more on athletics. We are the title sponsors for the National Cross-Country Championships. When we started in 2016, we just took this field, did well, and decided to do it. But we walked through the journey. We went through the trails, the Regionals, the Nationals, then we went to the camp. That was a bit different because then you actually get to see the hard work. If I am sitting in Nairobi and I see the guys run, you forget the hard work that goes into it. When we did the first camp in 2016, we got to see those guys wake up for their first run at 4 am, then another run at 10 am, then their normal exercises and trainings, then a third run at 4 pm, and another at 6 pm. You have to change even where you are training. You have to go to higher altitudes, or a region that is colder, or a terrain that you are not used to running in. For me, that changed the whole narrative in terms of sports and now we focus very much on athletics. We are one of the biggest sponsors in terms of athletics in the country now because once you do the journey, you will want to keep doing it. You get invested. You see young people who started and they were juniors and now they have cleared and they want to start running marathons. Even Eliud, when he was transitioning to marathons, I was not sure, but then you see him training and you see him actually do it and now big corporates like Nike are interested in him. I remember being with him when he was just starting out! The Foundation is good because you get to interact with your customer base. They know that for every shilling, for every ticket that they buy, there is a percentage that will go back to the community. Even in terms of how it has changed our business, players will play and mention that they saw us do a disability project and regardless of whether they win or not, they know their money will help someone. It has become a main focus for the business in terms of us giving back. We get to interact, we get to see different places, different people, different needs. From the business side, when someone wins 1 million and they tell you the things that they are going to do with it, we even question among ourselves how much they have won. If you won $10,000 it does not seem like that much until you go on ground and that person tells you what they plan to do with that money. You actually sit back and evaluate your life and it makes you think that you do not appreciate things as much as you should. That person on the ground is telling you they are going to use that money to build a house, buy a property, buy a cow and a motor bike so they will be self-employed. We get to see how much it has changed people’s lives. One even has a cow named “Lotto”. It works very well with our tagline. Our motto for the Foundation was “To Change Lives”. We try to approach the lotto the same way. If you win a big prize, $1 million, we try as much as possible to give you a call. We work with financial advisors who will tell you not to blow your money. 78% of people who win end up losing the money in the first two years. For me, it was very key, even in changing the narrative and how people operate. Because if you win $10 million and I visit you two years from now and that money did not help you, then it would be very sad because it does not make sense. The financial advisors will work with you through the process. If you won $10 million and you say you want to buy a Range Rover, your money is gone. If you want to buy land, where? If you want to buy a house, here is what would work with your budget. You might need to save $2 million after. The biggest jackpot we have ever awarded was $400 million. He won and he was still in disbelief. He stayed with us for over a month. If he is interested in property, you have to introduce him to a lawyer who will do surveys and clearance so he does not get duped into buying things that are not actually real. In terms of going home, someone had to sit with him and do counseling for over a month. If it was someone in the city, then the perception is very different. It was someone from the rural areas, though. If they go home with $1 million, then what? It will not change as much or they will spend it on frivolous things. If you are thinking of starting a dairy business and you want to do 50 or 100 or 200 cows, that $50 million is gone. If it does not work out, then it means you have lost that already. Those groundings would actually make sure that for whoever has won, their lives are actually changed for the better. This actually makes lifetime customers because he has seen you, you have changed his life, you have gotten him to a point where he is able to actually make a living out of the winnings that he won. The lifetime value that you get out of that person is actually more just because you went the extra mile in investing in the process. So that has worked for us. The Foundation has even changed the way we do business. If we do not make a lot of money, then it means we have very little to give. We try to push and we try to find a balance.
What do you provide on the corporate side and what is your competitive advantage?
The billing and corporate side is the oldest business that we have. We offer a wide range of billing and payment solutions to clients. We offer payment solutions to banking. They already have their own banking system, but the banking system is wired a certain way and technology keeps changing. In Kenya now, all the banks must have M-PESA because it is easier to do a deposit digitally rather than going to the bank. For Safaricom, the main issue is communication. They are not trying to offer solutions to the bank and the bank needs to cater to their needs. There are always gaps that are left in the market. As much as the banks need to work with the telecos, there is a bridge that needs to be there. In terms of even the CRM, if they take a solution like Oracle and the big providers, it does not translate to our market as it is. We are very mobile oriented. So, if a bank does not have the mobile platform, or is not offering such a solution, then they will be left behind. If people are moving from the generation where they actually go and bank money physically and you are left behind, then it means you are losing a customer base. The banks that have grown have done so because they have exploited that niche in the market. We offer solutions that will help integrate what you already have with the tech that is changing. We are not competing with banks. I am not a wallet. We do not keep money and we are not competing with them in terms of deposits, so banks do not feel threatened. In terms of telecos, I am just providing a solution to their clients. I come and sit on both platforms and I make them integrate seamlessly. It means if you have merchants who need to move money B to B or B to C, a solution that may not be offered by the bank or the teleco, there is always a gap that is left in between and we offer that. In terms of even customer communication, you need to send messages to your clients. If you withdraw money, you ought to get an alert for your transactions. We offer those solutions to banks in terms of transactional messages when you deposit. In terms of CRM, it is not yet here, but in Ireland and the UK, we also have the anti-fraud mechanism. We work with companies like the banks and VISA. If you normally use your card in France, but you are traveling and you swiped your card in Nairobi, it creates a trigger where someone calls you within less than a minute to ask whether that was you. If it was not you, your card is canceled and locked out. We are becoming a global village, but we started solutions that are very locally based. With Tola and Dynamic Mobile Billing, we offer solutions across the board. Tola is integrated in the African market. When buying through Amazon, you have to set up your PayPal account, go through the process, put in where the product will be delivered. Someone like G4S could deliver here because I can pay through M-PESA. I can give them my details and they will come up to where I am because the telecos already have your location. If it is on, you can even track where your courier is. We offer solutions that have been left by big tech companies who have made a solution that is more blanketed. We come in and customize such solutions to work for you and your clients and your business. If I give you a targeted solution for you, then it makes your work easier. Your target market is different. If you take it as NIC or CBA and adopt it you will find the gaps that are still left. Tola comes and plugs into your system and whether it is the teleco or whether it is a communication issue, we will come and make it as seamless as possible and make the various platforms communicate. It becomes very easy for you to run your operations.
What is your international reach?
For the billing side, we offer solutions in the UK, Ireland and the US. In Africa, we are in South Africa, Zambia, Kenya, Uganda, Tanzania and Ghana. We are already integrating in Cameroon and we have plans for Sierra Leone. Zimbabwe has been difficult to enter but we are making progress. We are in over 15 countries in billing and corporate solutions.
Project yourself into the medium term, two to three years’ time. What is your vision for the company on both sides? What do you hope to achieve?
For now, we want to get the company through the rough patch. This is a company that was built on certain principles and when that was violated or when that was not adhered to, it was a tough change even for employees. When I came in, I was trying to find a balance between the expected terms of culture and how they were working. In the short term, I want to see Oxygen 8 change and be a bit more stable. I want to let it grow back and get its reputation back to the company that it was. When you have only one smudged dot, it is difficult. Even for the narrative, at the end of day, when someone has worked in different regions and only one region messes up, then they have a certain perception about the region or even the people. For us, the biggest one was to change the narrative and the perception that the investors had. We may have a few loopholes in Kenya, but it is a good market. It is a market that is growing and open to investors. If you actually change that, then you get people who are more open to come in and do business here. The news may have a different view, but they need to sell news a certain way to get hits. I want to get to a level where we change the perception of even the investors that I have for them to realize that you will find good people and bad people in different areas, the same way I would find a bad person in the UK or Ireland. My biggest challenge now has been to change that focus and it is working. Slowly but surely, we are getting there. We want to steer the company in the right direction, have the people who have the right work ethic. If it is a lottery, let it be open and transparent. If I am able to change the view the people have of the gambling industry, that will actually help a lot because the views that are out there are what people put out there. I hope people would actually see that this is a business that creates employment. We have over 70 people in the building now who are running different brands, not even counting the suppliers who rely on us. If we are able to grow and get to a point that the ship is steady, then we want to expand. I want to replicate the lotto we have here. My immediate plan would be to launch in Zambia, then South Africa and Botswana. Long term, we want to be present in the whole of Africa. It is a good business. It is fun when you do it just for fun. In terms of billing, I want to be the leader in offering solutions across the market from communication to banking to telecos where we have small gaps. Because we have had the opportunity to work with Safaricom, the best thing is that it took off right away and fully and we left others behind even in the developed market because M-PESA is the biggest of its kind in the world. I hope we can work with telecos to get to where Safaricom is. Safaricom has made it very easy for our market. There is not a market that has taken off as much in terms of the gambling solutions industry like Kenya has. But we do owe it on some level to the tech development that has gone into Airtel and Safaricom. We do not even need agents here, unlike lotteries all over the world. You can simply buy your ticket from home. You can spend as little as 10 shillings for Tatua. If you have the money, you can even go up to 1,000. The tech solutions we have now have enabled us to work and grow to where we are now. If we are able to expand and go to other countries and take the same tech and help them grow and reach where we are, the impact will reach to the banking areas. The last time I went to a bank was in 2016 or 2017. I do all my transactions online. If I have cash that I need to deposit, I just load my M-PESA. In terms of tech, we want to adapt it to different markets and different sectors. Why not make life easier? It has made life easier for us in Kenya. On the lottery side, I want to be able to have fun because it is meant to be something that you do for fun. It is the anticipation of whether you are going to win or not. I want to replicate that and expand to different regions. Even here, I want a bigger market share than I already have.
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