Let market logic prevail in Safaricom stake sale

First, they question the opacity in valuation methodology, arguing the proposed Sh34 per share lacks publicly disclosed justification and falls short of Safaricom's 2021 peak of Sh44.70. Second, they warn of losing predictable dividend income by monetising future returns.

Third, they fear diminished strategic control as Vodafone's shareholding rises to 55 percent, potentially reducing government leverage over policy-sensitive decisions. Fourth, they advocate for an IPO instead of direct negotiations.

While the CMA's endorsement matters, its close ties to the National Treasury—evident in its board composition—make it somewhat compromised. The NSE's position, however, carries decisive weight. As the market referee, the exchange protects market integrity, liquidity, and price discovery without policy bias or shareholder advantage.

When the NSE endorses a transaction of this magnitude—subject to execution through its regulated Block Trading Board—it signals that the deal meets critical standards for market structure and investor protection. Importantly, the NSE hasn't issued a blank cheque.

Its message is unambiguous: the government must execute within established rules, ensuring full disclosure, sound governance, and real-time reporting.

This contrast reveals the fundamental tension. The NSE's stance reflects how value is actually realised in capital markets. ICPAK's position, meanwhile, exhibits the accountant's instinct: anchoring on historical prices, treating dividends as sacrosanct, and assuming value remains static.

Is Sh34 too Low? Critics repeatedly invoke Safaricom's historical peak of around Sh41. This argument only holds if markets operate in straight lines and past peaks predict future values. They don't.

The NSE understands this reality. Prices reflect prevailing conditions, liquidity, risk, and expectations.

That's why it endorsed both the transaction structure and pricing logic, accepting that Sh34 represents a significant premium to the six-month volume-weighted average price. In market terms, value is measured not by nostalgia for past highs, but by where the market consistently clears. Accountants think in absolutes; markets think in ranges.

Why not an IPO? ICPAK questions why the government chose direct negotiations over an IPO or open-market sale. This reveals another disconnect from market realities. Safaricom isn't a marginal stock—it's the NSE's most important counter, accounting for substantial market capitalisation and daily turnover.

The NSE explicitly supported execution through the Block Trading Board rather than on-market sale because flooding the market with 15 percent would likely depress share prices, harming retail investors, pension funds, and market stability.

The exchange's endorsement reflects a clear judgment: a negotiated block trade preserves orderly trading and price discovery.

Consider the current environment: Diageo is selling its EABL stake through negotiated transaction, not a public offering. Bamburi's recent transaction was similarly structured as a private sale. There's a reason sophisticated market participants choose this route.

Why are we monetising future dividends? ICPAK treats future Safaricom dividends as risk-free annuities that must never be traded. The NSE and National Treasury see it differently: dividends are one form of return; capital redeployment is another.

By accepting upfront payment instead of future dividends—at a financing cost below sovereign yield—the government converts uncertain, long-dated cash flows into immediate capital while retaining a meaningful 20 percent stake.

Safaricom is a mature asset in a fiscally constrained state. The choice isn't between "selling cheap" and "holding forever." It's between reallocating capital now to unlock economy-wide growth, or clinging to static value conceptions while fiscal space closes.

The greatest risk to the government is not partial divestiture, but future dilution at unfavourable prices when the state cannot participate in capital calls.

Here's a quotable paraphrase of CS Mbadi's core argument as he made his submissions before the parliamentary committee this week.

"We're not selling off Safaricom—we're strategically liquidating a matured investment at its peak value to fund critical development without burdening future generations with more debt." Let the rumble rage on.

 The writer is a former managing director of The EastAfrican