Treasury rakes in Sh245b from Safaricom sale transaction

The government has raised Sh244.5 billion from the sale of a 15 per cent stake in Safaricom to Vodacom.

The deal, signed on Thursday in Nairobi, will see Vodacom purchase a 15 per cent stake from the government for Sh204 billion. 

Vodacom also agreed to buy the right to receive future Safaricom dividends and will make an upfront payment of Sh40.2 billion to the Treasury.

This acquisition will increase Vodacom’s ownership from 35 per cent to a controlling 55 per cent. Following the transaction, Safaricom will be owned by Vodacom (55 per cent), the Kenyan government (20 per cent), and public investors (25 per cent). 

For the first time, both Vodacom and its parent company, Vodafone, will fully consolidate Safaricom’s financial results, reflecting its status as a controlled subsidiary.

Vodafone Group CEO Margherita Della Valle said the move was “an opportunity to gain a controlling shareholding in a highly successful African business in an attractive market.”

Unlocking capital

National Treasury Cabinet Secretary John Mbadi defended the Safaricom sale plan.

“This transaction is one of the first steps in the President’s stated agenda of innovatively unlocking capital... to allow additional investment in critical infrastructure to support future growth,” he said in a statement. He emphasised the government would retain a 20 per cent stake and board representation.

While the National Treasury has framed the sale as an innovative way to raise immediate capital without raising taxes or debt, several experts contend the government may be selling its stake too cheaply and giving up future financial gains that will now accrue to the foreign parent companies.

They argued that the short-term fiscal fix could sacrifice far greater long-term value and strategic control for the nation. Deepak Dave of Riverside Advisory provided a pointed, four-point critique of the transaction from Vodacom’s perspective, underscoring what Kenya stands to lose.

“First, it gives Vodafone-Vodacom full control of a cash-generative subsidiary. It’s an instant boost to the parent’s valuation even before next year’s cash dividends,” Dave said.

“Second, it opens up the possibility of a very lucrative M-Pesa spinoff which will now be easier to price, plan and execute without a vocal minority partner.”

“Third, it crystallises a hard value for Safaricom should Vodafone ever want to spin off any or all of the M-Pesa, digital, or fibre businesses, or leverage them with debt to fund growth in a different new segment. It is critical to have 100 per cent control if one wants to do those things, particularly when your minority partner is also your regulator.”

Applying this logic to Kenya’s position, Dave concluded: “It’s a bad deal for the Government of Kenya. They’re getting an amount that barely closes any deficit gaps this year and closes off very lucrative future valuation uplifts from spin-offs or other initiatives.”

Experts also raised the concern of diluting influence over a key national asset. Safaricom is seen as more than a telecoms operator. Its M-Pesa platform functions as an essential national payments system, processing over 100 million daily transactions.  The National Treasury has previously classified it as a potential systemic risk to Kenya’s economy. Reducing the State’s stake, analysts argue, weakens its direct influence over this critical service at a time when regulators have debated forcing telecommunications companies to separate their mobile money units from their main businesses.

The experts additionally questioned the timing and price of the sale. Some analysts believe the valuation does not fully account for Safaricom’s significant growth potential, particularly in the new Ethiopian market and its expanding fintech ecosystem, which reported M-Pesa revenue growth of 14 per cent in the last half-year.

Analysts also questioned the government’s willingness to weaken its boardroom influence. The sale follows a period of delicate negotiations over board appointments.

With a reduced stake, the government’s legal power to nominate and influence key board positions, including the influential chairmanship, is diminished, potentially affecting decisions on dividends, investment, and strategy.

However, critics counter that the government is trading a long-term, dividend-yielding strategic asset for a one-off cash payment. Safaricom contributes about Sh150 billion to the exchequer in taxes, fees, and dividends every year.

“The transaction fundamentally alters the balance of power,” said an independent Nairobi-based analyst who declined to be named.

“The State has moved from a powerful blocking minority to a more passive investor, just as the company stands on the cusp of its next major phase of creating value.” The deal remains subject to regulatory approvals in Kenya, Ethiopia, and South Africa and is expected to close in the first quarter of 2026.