Delays in the sale of the government’s 15 percent stake in Safaricom to South Africa’s Vodacom in the wake of a suit are on course to gift the Treasury Sh16.1 billion in dividends.
The government, through the Treasury, is expected to maintain its stake in the telecoms operator at 35 percent or 14 billion shares as a court process drags out the stake’s sale process.
This will earn the State dividends of Sh16.1 billion from the 15 percent stake, which initially would have gone to Vodacom.
Parties to the transaction had expected the Sh244.5 billion Vodacom deal to be concluded by March 31, locking out the government from earning the final dividend of Sh1.15 that Safaricom declared on Thursday for the 15 percent stake.
The sale of the stake could be delayed beyond August 4, 2026, when Safaricom closes its books for the payment of a final Sh1.15 dividend per share payout covering its financial performance in the year through to March 31.
The State is set to raise Sh244.5 billion for the exchequer, including Sh204.3 billion for 6.0 billion shares sold for Sh34 per share, and an advanced dividend of Sh40.2 billion.
The transaction was frozen when petitioners, Tony Gachoka and Fredrick Ogola, sued several State agencies, Safaricom Plc and Vodacom Group over the legality of the government’s plan to reduce its stake in the telecoms giant.
Two other petitions were filed by Paul Maina and one only identified as Mr Samuel.
The High Court referred the petition to Chief Justice Martha Koome at the end of March to appoint a multi-judge bench, after the judge handling the case stepped aside due to time constraints.
The planned sale to South Africa’s Vodacom has sharply dividing opinion in Kenya.
Analysts and politicians are divided on the merits of the sale, which requires legislative and regulatory approval.
Some reckon the deal is good for Kenya, while others are sceptical about the value for the country, arguing that Vodacom remains the winner after getting full control of a cash-generative subsidiary.
A joint parliamentary committee approved the sale, paving the way for the conclusion of the deal.
The board of Safaricom has lauded its shareholders for remaining calm amid the roller-coaster of deliberations and intrigues.
“There is an ongoing process. We commend the shareholders for the constructive and professional manner in which the discussions have been conducted so far,” said Adil Khawaja, the Safaricom Plc board chairman.
“Once concluded, the transaction will position Safaricom to leverage greater scale, deeper expertise and enhanced regional capability as we continue to expand.”
The National Assembly’s committees on National Planning and Finance and Public Debt & Privatisation reckoned that Safaricom’s share sale agreement with Vodafone is silent on the Treasury receiving dividends from a 35 percent shareholding.
The report from the joint committee said the sale agreement and Sessional Paper or Treasury document on the deal presented to Parliament was unclear whether the Treasury would receive dividends from the 15 percent stake should the deal close after Safaricom’s financial year in March.
“The joint committee observed that the Sessional Paper does not clearly specify entitlement to dividends declared for the 2025 financial year, particularly if the divestiture is approved and completed before Safaricom’s financial year-end on March 31, 2026,” said the two committees in their report.
“The transaction must also clearly specify whether it is on an ex-dividend (buyer does not receive the dividend) or cum-dividend (buyer receives the dividend) basis.”
Safaricom has already declared an interim dividend of Sh0.85 per share for the current year, which was paid on March 31 to shareholders who were on its books on February 25.
Facing high public debt, limited room to raise taxes, and annual debt repayments that absorb 40 percent of government revenues, President William Ruto’s administration is turning to asset sales to bolster its finances.
The government’s stake in Safaricom will drop from 35 percent to 20 percent.
Concurrently with the purchase of the 15 percent stake from the government, Vodacom is also buying a five percent stake in Safaricom that is held by parent firm, Vodafone Group, at the same price of Sh34 per share.
Once the twin deals are sealed, Vodacom will raise its ownership in the telecoms operator to 55 percent, attaining majority control.
Other investors hold a 25 percent stake, equivalent to 10 billion shares, which were offloaded in a March 2008 initial public offering (IPO) of the company, raising Sh51.75 billion.
The government received Sh11.9 billion in interim dividends from Safaricom after it raised its initial payout by 54.5 percent to Sh0.85 from Sh0.55 previously.
Last week, Safaricom raised its final dividend to Sh1.15 per share from Sh0.65 previously as its net profit rose 36.9 percent to Sh95.6 billion for its financial year ending on March 31.
The cumulative Sh46 billion dividend will be approved at Safaricom’s annual general meeting (AGM) on July 31, and will be paid by September 4 to shareholders on the company’s register by August 4.
Safaricom’s total dividend for the year translates to Sh80.13 billion or Sh2 per share and aligns with the company’s dividend policy of paying out 80 percent of its earnings to shareholders.
The share of the government’s dividends from the pool is Sh28.04 billion.
Proceeds from the 15 percent State stake sale in Safaricom are expected to form seed capital for the recently established National Infrastructure Fund (NIF).
The seed capital for the fund currently has proceeds from the IPO of the Kenya Pipeline Company (KPC), which was concluded earlier in March.
The NIF is expected to serve as the primary vehicle for financing large-scale infrastructure expansion, including roads, railways, energy and water systems.
The fund is expected to crowd-in the large-scale private sector investment through domestic resource mobilisation, and monetising mature public assets by leveraging capital markets.
The Treasury previously indicated that there was no rush to unlock proceeds from the sale, given that the funding flows would not be flowing into budget support.
“We are not using this money for budgetary support. Whether it comes or doesn’t come (in this financial year), our budget will be implemented in the usual way,” John Mbadi, the Treasury Cabinet Secretary, said.
“I believe we are going to complete this transaction very quickly and very soon. Of course, the matter is now in court and we respect the independence of the Judiciary.”
