Scanning the back pages of London’s Financial Times is not something that we at Mediolana do nearly enough of, but a recent spare five minutes yielded exactly this activity – and in one respect at least we were genuinely shocked at what we found. And the surprise didn’t come in the news that Vodafone are planning to launch a version of M-Pesa – a mobile payments system that has proven phenomenally successful in Kenya and Tanzania – in Europe: as living standards continue to stagnate or decline in much of the eurozone and beyond, a new generation which is less tied into conventional financial structures such as the traditional bank account needs to be catered for.
The stupefaction came in the detail. M-Pesa originally began as a humble pilot project in 2006. The value of this project? A mere £2m – not bad for software than handles an estimated 33% of Kenya’s gross domestic product per month in SMS-ed cash. But what is arguably the bigger revelation is the fact that of that initial £2m, half of the investment was not put up by Vodafone, but contributed by the UK government’s Department for International Development (‘DFID’).
Of course, this sum of money was only the beginning: Vodafone and its East African subsidiary Safaricom have pumped in significant volumes of capital since to build up the M-Pesa network – as well as attempting to export the model to other emerging markets with varying levels of success. But the fact remains that without the DFID subsidy, M-Pesa as we know it today would have been nothing more than just another idea which never made it beyond the conceptual stage. As the inimitable Mariana Mazzucato copiously illustrates in her excellent and provocative thesis The Entrepreneurial State, there is a definite pattern of corporations riding off the coattails of government subsidy in ‘risky’ investment areas such as high technology: companies only allocate resources to sectors in which the state has already tested the water.
Yet as Vodafone prepares to roll out M-Pesa in the Old Continent, the urgency of reexamining the equity and expectations of this type of financial aid has perhaps never been greater. As the FT rhetorically poses: ‘…should taxpayers have shared in M-Pesa’s long-run upside…?’ Should citizens demand much, much more from both their governments and state agencies in determining exactly how their money is risked – and in securing an apposite financial return commensurate to the risk involved? And should there be a much greater reconceptualisation of the state as entrepreneur than has thus far been envisaged?