State faces new hurdle in meeting Safaricom stake sale conditions

The National Treasury is facing growing pressure to meet strict parliamentary conditions required for the sale of a 15 per cent stake in telecoms giant Safaricom to South Africa’s Vodacom before the April 1 deadline for the Sh244.2 billion deal.

Parliament last week approved the controversial sale but added strict conditions, including a permanent ban on job cuts linked to the deal, protection of Safaricom’s local dealers and agents for 10 years, and directing all proceeds to a new National Infrastructure Fund.

The conditions, which go far beyond the government’s initial proposal of a three-year worker safeguard, reflect the high stakes involved in a transaction that will reshape ownership of Kenya’s most profitable company.

The committee members reckoned that Safaricom is not just any corporation; it is one of East Africa’s largest private sector employers and a cornerstone of the national economy.

According to Safaricom’s 2025 Sustainable Business Report, the company supports more than 1.3 million jobs across Kenya through its direct operations, supply chain, and wider economic ripple effects.

Its M-Pesa platform alone serves over 35.8 million active customers and processes transactions valued at more than Sh83 trillion annually, equivalent to nearly four times Kenya’s GDP.

The company contributed Sh1.1 trillion to the economy in the last financial year, 16 times its financial profit, according to its “True Value” assessment.

The vast ecosystem extends to over 400 key distribution channel partners operating through 2,170 outlets, more than 300,000 M-Pesa agents, 675,000 Lipa Na M-Pesa merchants, and 1.15 million Pochi la Biashara points, amounting to over two million physical and digital touchpoints nationwide.

These businesses, which have collectively invested over Sh1 trillion to build distribution infrastructure, are now seeking ironclad protections against potential disruption.

The parliamentary conditions are designed to prevent post-acquisition job cuts that often come with takeovers globally, where the acquiring firm decides to shed off some staff to eliminate redundancies and capture efficiency gains.

“There shall be no acquisition-related redundancies in Safaricom PLC,” the joint committee’s report states, transforming what was initially a three-year commitment into a permanent safeguard.

“The Cabinet Secretary for the National Treasury shall ensure that, within ten years of the divestiture, there shall be no material change to the current shared prosperity business model in Safaricom PLC that will prejudice the existing Safaricom PLC dealers, agents and other business partners,” the committee’s report adds.

The effective date for the sale is set for April 1, or a later date once all outstanding approvals are obtained, putting pressure on Treasury Cabinet Secretary John Mbadi to satisfy lawmakers’ demands. 

The joint parliamentary committee on finance and public debt, which scrutinised the plan, also mandated that the deal be executed through a block trade on the Nairobi Securities Exchange.

The sale, which will see Vodacom’s stake rise to 55 per cent from 35 per cent, gives the South African group effective control of the company known for its dominant M-Pesa mobile money platform. The government’s holding will reduce to 20 per cent, though it will retain two board seats to safeguard national interests.

However, the report drew sharp division from the MPs during the debate, with Kiharu MP Ndindi Nyoro-led opposition arguing that the report undervalued the profitable national asset. “The deal was undervalued. Kenyans have been given a raw deal. The joint committee is incompetent,” he was quoted as saying during the heated session.

Molo MP Kuria Kimani, who chairs the Finance Committee, defended the process. “In arriving at the proposed offer price of Sh34 per share for Safaricom PLC, the valuation employed various assumptions, projections and weighting that was applied across the various valuation methodologies,” he said, referencing the committee’s findings.

Legal status

The valuation applied multiple recognised approaches, including Discounted Cash Flow, Discounted Dividend Model and trading multiples.

Opposition figures have also weighed in. Wiper arty leader Kalonzo Musyoka accused Mbadi of misleading parliament over the legal status of the infrastructure fund meant to receive the proceeds, warning that the sale poses national security risks given Safaricom’s role in government payment systems and digital identity infrastructure.

The President William Ruto government has defended the sale as a necessary move to raise cash for infrastructure without adding to public debt, which consumes about 40 per cent of annual revenues for repayments.

Under the complex deal, Vodacom will also pay the government a Sh40.2 billion upfront sum in lieu of future dividends on the state’s remaining shares, a structure the committee said it found financially advantageous.

“On a present-value basis, Sh55 billion discounted at market rates is worth approximately Sh29.3 billion today, yet the government would receive Sh40.2 billion, representing a Sh10.9 billion gain,” the committee observed.

Liquidity needs

Analysts have noted that while the Sh34 per share price represented a 17 to 19 per cent premium to the six-month average at the time of the December announcement, it remains well below the company’s all-time high of over Sh45 reached in 2021, reflecting immediate liquidity needs rather than optimal market timing. 

The committee acknowledged this concern but concluded that “the negotiated price reflects a premium above historical market trading levels and aligns with subsequent market movements, thereby mitigating concerns regarding potential undervaluation.”

With the April 1 deadline approaching, the Treasury must now navigate the final regulatory hurdles, including approvals from the Competition Authority of Kenya and the Communications Authority, while ensuring the binding parliamentary conditions are fully embedded in the final agreements. 

The Central Bank of Kenya is also conducting a comprehensive review, with Governor Kamau Thugge noting that M-Pesa’s status as a “systemically important payment system” means its failure “could trigger widespread financial instability or materially impair the real economy.”

Failure to meet the conditions could reignite opposition to the deal and threaten the entire transaction, leaving the government scrambling for alternative funding sources to finance its infrastructure agenda.