The government plans to sell a mega stake in telecoms operator Safaricom before June next year in efforts to raise the bulk of Sh149 billion expected from the privatisation of State enterprises.
Treasury Cabinet Secretary John Mbadi reckons Safaricom is the only big-ticket firm that could help the State meet its target of raising billions of shillings in a fiscal year when it avoided new taxes in the Finance Bill.
The State retained a 34.9 percent stake in the Nairobi bourse-listed firm worth Sh280.5 billion after selling a 25 percent share to investors via an initial public offering (IPO) in 2008.
The sale promises to be the largest transaction in the region as global private equity firms prowl Africa for telecoms deals because of their predictable revenues and steady cash flows, which can then be used to service the debt taken on to buy the company.
“There is talk that if we could offload more of our ownership of Safaricom, where we are likely to get the Sh149 billion through privatisation in the 2025/26 financial year,” Mr Mbadi told the Business Daily in an interview.
Safaricom’s IPO was oversubscribed by 532 percent after the State sold the 25 percent stake, or 10 billion shares, earning Sh51.75 billion for the Treasury.
Analysts expect a scramble for the additional sale of the government stake in Safaricom.
The Safaricom’s stake could take the form of a secondary IPO or an auction to a high-net-worth investor for a block sale.
A second offer occurs when an investor sells their shares to the public on the secondary market after the first offer, with proceeds going directly to the pockets of the investor.
The sale of five to 10 percent of the government’s stake in the telecoms operator would, for instance yield between Sh39.8 billion and Sh79.7 billion at the prevailing share price of Sh19.90.
Analysts have favoured an off-market transaction if the government is to unlock the maximum possible return from the planned divestiture.
This involves sales to high-net-worth investors like private equity (PE) funds that offer a premium to the market price.
“The most prudent approach given the current market pricing on the stock, which is at deep discounts to the company’s fair value estimate, would be an off-market transaction, similar to what we have seen recently in the banking sector where interested shareholders purchase a block from a shareholder at a premium to the market rate,” said Wesley Manambo, a Senior Research Associate at Standard Investment Bank (SIB) who covers Safaricom.
The State has been short of entities deemed ripe for privatisation as the bulk of them are struggling after years of loss-making and mismanagement.
Apart from Safaricom, the Kenya Pipeline Company (KPC) is seen as the only other viable firm that can help the State move closer to the Sh149 billion target.
“We are moving quickly and have signed some documents to allow for privatisation of KPC to be done. Why we say KPC is ready is because one, it is profit making and second, it is already a limited liability company,” said Mr Mbadi.
Safaricom remains the region’s most profitable firm, riding on the back of the data and M-Pesa, which has seen the operator consistently pay dividends.
The telecoms operator posted a 7.2 percent growth in net profit in the financial year ended March 2025 to Sh45.7 billion from Sh42.6 billion, including results from its Ethiopia business.
It proposed to pay Sh0.65 per share as a final dividend, having paid an interim dividend of Sh0.55.
The Sh1.20 total dividend payout represents a windfall of Sh16.8 billion for the exchequer.
This implies that the Treasury would be foregoing part of its annual income paid as dividends if it closes a stake sale deal in the fiscal year starting July.
Safaricom says its earnings could surge as much as 50 percent this financial year, as it projects that losses in the key expansion market, Ethiopia, would fall steeply.
It launched in Ethiopia in 2022 as the government there opened up the tightly controlled economy to foreign competition.
The company has had a bumpy ride in Ethiopia due to security, inflation and currency challenges, but it remains bullish that Africa's second most-populous nation will power future growth.
Kenya last privatised a State-owned company in 2008 with the Safaricom IPO.
“If there is a meaningful discount, we might see good interest from the retail market given the direction of interest rates,” said Mr Manambo.
“While floating the shares in the market is a viable approach, a skew of the demand and supply dynamics towards supply may drag prices lower, in effect lowering the net amount raised from the sale. It however, has a plus in that a sale via public markets brings inclusivity given the nature of the asset being sold.”
The proceeds from the sale of stakes will back the Sh3.3 billion revenues from taxes and ministerial levies for funding the total expenditure at about Sh4.2 trillion, which is before Parliament for debate and approval.
Initially, the State had selected 11 firms, including Kenya Pipeline, Kenyatta International Convention Centre (KICC) and New KCC, from among more than 35 companies that are slated for sale to partially help raise revenue in the face of growing debt repayments.
