Lesson 11 introduced debt-to-equity using Safaricom's own numbers. Today we put Equity Group's debt-to-equity ratio next to it — and learn why a bank being far more "leveraged" than a telco is normal, not a warning sign.
Debt-to-equity compares how much of a company is funded by borrowed money (debt) versus how much is funded by the owners' own money (equity):
Debt-to-equity = Total borrowings ÷ Total equity. A ratio of 1.0 means a company has borrowed exactly as much as its owners have put in. A ratio of 3.0 means it has borrowed three times its owners' stake. On its own, a high number isn't automatically bad — it depends entirely on what kind of business is doing the borrowing, which is exactly what this lesson digs into.
Safaricom's balance sheet as at 31 March 2024 shows borrowings split between non-current (long-term) and current (due within a year), plus total equity:
| KShs millions | 2024 | 2023 |
|---|---|---|
| Borrowings (non-current) | 63,093.2 | 42,050.0 |
| Borrowings (current) | 45,053.9 | 45,555.4 |
| Total borrowings | 108,147.1 | 87,605.4 |
| Total equity | 335,747.9 | 263,365.9 |
Source: Safaricom PLC Annual Report and Financial Statements 2024 (figures simplified/grouped for this lesson; audited, currency KShs millions).
Adding the two borrowing lines and dividing by equity:
Safaricom borrows roughly a third of what its shareholders have invested — a modest, fairly stable level of debt from FY2023 to FY2024.
Here's where it gets interesting. Equity Group is a bank, and the briefing data confirms only five cross-checked balance sheet lines for it: total assets, total liabilities, total equity, customer deposits, and net loans to customers. There is no confirmed "total borrowings" line broken out separately — because for a bank, customer deposits themselves are the main source of borrowed money.
| Shs'000 | 2024 | 2023 |
|---|---|---|
| Customer deposits | 1,399,648,121 | 1,358,227,584 |
| Total liabilities | 1,557,758,334 | 1,603,299,418 |
| Total shareholders' funds (equity) | 246,864,094 | 218,135,102 |
Source: Equity Group Holdings PLC Audited Financial Statements for the Year Ended 31 December 2024 (audited by PwC, consolidated Group figures, currency Shs'000).
Customer deposits (KShs 1,399.6bn in 2024) are technically a liability — the bank owes that money back to depositors on demand or on term. That makes deposits economically similar to debt, but they aren't labelled "borrowings" the way Safaricom's bank loans are. Rather than guess at a separate "borrowings" sub-line that isn't in our confirmed data, this lesson uses the one figure we can trust for a leverage comparison: total liabilities (which already includes deposits) against total equity.
Using total liabilities ÷ total equity as our leverage measure:
| Ratio | Safaricom (FY2024) | Equity Group (2024) |
|---|---|---|
| Borrowings or liabilities ÷ equity | 0.32 (borrowings only) | 6.31 (total liabilities) |
A bank's entire business model is taking in deposits (a liability it owes back to customers) and lending most of that money out as loans (an asset that earns interest). That means a healthy, ordinary bank will always carry far more liabilities relative to equity than an ordinary company like Safaricom, whose liabilities are mostly supplier bills and loans taken out to build network infrastructure. Equity Group's 887,379,832 (Shs'000) in net loans to customers in 2024 is funded overwhelmingly by its 1,399,648,121 in customer deposits, not by shareholder equity — that's simply what a bank is.
The lesson here isn't "Equity Group is riskier than Safaricom because 6.31 is bigger than 0.32." It's that debt-to-equity only means something when you compare like with like — a telco against another telco, or a bank against another bank. Comparing a bank's leverage ratio to a non-bank's and calling the bank "over-leveraged" is a beginner mistake worth avoiding.
Next lesson, we'll look at growth that isn't real — specifically Safaricom's hyperinflationary monetary gain from its Ethiopia operations, a non-cash item that inflated profit before tax, and why a careful reader always checks what's actually driving a profit figure before trusting it.
Primary source for this lesson's numbers: Equity Group Holdings PLC Audited Financial Statements for the Year Ended 31 December 2024.
Something unclear, or want to dig into a line item we skipped (like "why deposits count as a liability at all")? Ask your teacher — that's what these sessions are for.