Safaricom has become the Kenyan government’s latest lever for mobilising development capital after the National Treasury offered to cut its shareholding in the telco from 35 percent to 20 percent to unlock new financing for priority infrastructure.

 

The State is offloading a 15 percent stake in the country’s largest listed company to its parent, South Africa’s Vodacom Group, in a deal that will raise Ksh244.5 billion ($1.89 billion).

Treasury Cabinet Secretary John Mbadi told Parliament that the partial divestiture is “well-positioned to support the financing of our priority infrastructure requirements” at a time when the country’s fiscal space remains tight.“It marks one of the most significant State divestitures in recent years and signals a shift toward leveraging high-performing national assets—rather than borrowing—to fund Kenya’s infrastructure ambitions,” the Finance Minister said in his Thursday proposal to lawmakers

It will also see the government sell the right to receive future dividends of Sh55.7 billion ($430.78 million). The State has opted to receive a lump-sum payment now rather than wait for future dividend flows, effectively giving the South African firm a Sh15.5 billion ($119.88 million) discount.

Mr Mbadi has, however, defended the forfeiture as a calculated trade-off in favour of immediate fiscal needs.“The evaluation looked at all these factors. Don’t just look at it as a discount on the money, but also on the time we will get this revenue. The advantage is that we are getting money in advance, and there is value in that,” he told The East African on Friday.

By releasing more Safaricom shares to the market, the government also expects to attract additional institutional investors and deepen liquidity at the Nairobi Securities Exchange (NSE).“Unlike taxation, privatisation…encourages the propensity to invest, and enhances aggregate demand, which in the long run would widen the revenue base,” Mr Mbadi’s proposal to parliament states.“The transaction shall now increase institutional investors' desired stock of assets in the Exchange, and this will end up with an increase in the flows of foreign capital.”Concurrently, Vodacom is also buying a five percent stake in Safaricom held by its parent firm, UK-based Vodafone Group, at the same price of Ksh34 per share.

Once the two transactions are concluded, Vodacom will raise its ownership in the telco to 55 percent, giving it control after spending Ksh272.4 billion ($2.11 billion) on the share purchases. The Vodafone stake will cost it Ksh68.1 billion ($526.68 million).

Safaricom’s annual payouts have been among the largest sources of investment income for the Treasury, owing to the company’s long track record of profitability and generous dividend policy.

Mr Mbadi said the proceeds of the share sale will provide the seed capital for the proposed Infrastructure and Sovereign Wealth Funds, which will support projects in energy, roads, water and irrigation, and airports.

This includes the construction of 50 dams and an upgrade of the Jomo Kenyatta International Airport (JKIA) in Nairobi after the government last year cancelled a deal with India's Adani Group over its founder’s indictment in the United States.“This money is not going to finance our budget deficit support. We are investing it in the National Infrastructure Fund towards commercially viable public investment infrastructure. We feel this is converting it into a higher-value asset,” the minister told journalists on Thursday. He urged Parliament to operationalise the fund before the share transfer is concluded.

Alongside reducing its stake in these companies, the government seeks to privatise several State corporations to encourage private investment and lessen the fiscal pressure from loss-making and non-performing government entities.“We are reviewing a number of them, including KenGen,” Mr Mbadi said on Friday, referring to the electricity generator, in which the government owns a 70 percent stake.

The government also plans to privatise the Kenya Pipeline Company through an NSE listing by March 31, 2026, offering up to 65 percent of its shares while retaining at least 35 percent. Treasury targets about Ksh100 billion ($773.4 million) from the IPO.

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