SA's Vodacom wins Safaricom CEO post as State loses control

Vodafone Kenya, a subsidiary of South Africa's Vodacom Group, will gain the power to nominate Safaricom's next chief executive, but the board must ensure a "predominantly Kenyan character" in senior management, under governance changes set for a shareholder vote later this month.

The new rules mark the end of an era following the completion of a Sh244.2 billion stake sale that handed majority control to the South African telecoms giant.

The transaction, which became effective on June 30, saw Vodacom acquire 6,009,814,200 ordinary shares from the Kenyan government through a block trade on the Nairobi Securities Exchange, increasing its effective stake in East Africa's most profitable company to 55 per cent from 35 per cent.

The Kenya government's shareholding has been reduced to 20 per cent, while public investors retain 25 per cent.

The sale ends an era of State dominance in Safaricom, a company founded in 2000 as a joint venture between the Kenyan government and Vodafone that grew to become the region's dominant telecommunications and financial services provider, with a market capitalisation that at its peak exceeded Sh1.8 trillion.

For the cash-strapped Treasury, the sale represents a much-needed financial lifeline at a time when public debt consumes about 40 per cent of annual revenues.

The government will receive Sh204.3 billion from the sale of its 15 per cent stake, plus an additional Sh40.2 billion upfront payment for future dividend rights on its remaining 20 per cent shareholding, structured as a loan backed by the state's residual stake. The money is to be used for infrastructure development under the National Infrastructure Fund.

The deal, first announced in December 2025, had been stalled by court challenges before the Court of Appeal lifted orders blocking the sale on June 26. The court ruled that public interest outweighed the need to halt the deal, noting that delays were costing the state up to Sh70 million per day.

At the centre of the proposed amendments to Safaricom's Articles of Association, set out in the Notice of the 2026 Annual General Meeting published yesterday, is a provision that would allow Vodafone Kenya Limited (VKL) — a Kenyan-incorporated entity ultimately owned by South Africa's Vodacom Group — to nominate the company's chief executive officer for as long as it holds more than 50 per cent of Safaricom's issued and fully paid share capital.

The Notice, capturing Special Resolution 9 amending Article 103, said: "The Directors may subject to the provisions of Article 102 from time to time appoint a Chief Executive Officer as an executive director of the Company, from a list of nominees provided by VKL (for as long as VKL holds more than 50% of the nominal value of the issued and fully paid share capital of the Company excluding any shares hereafter issued pursuant to any share issuance to Article 13(c), for such period and on such terms and with such powers, and at such remuneration (whether by way of salary, or commission, or participation in profits, or partly in one way, and partly in another), as they may think fit and, subject to the terms of any agreement entered into in any particular case, may revoke any such appointment."

The amendment however directs the board to encourage "the retention of a predominantly Kenyan character in the Senior Management and Executive Committee of the Company."

"The Directors shall encourage the retention of a predominantly Kenyan character in the Senior Management and Executive Committee of the Company," it says. This new rule ensures that while the CEO nomination power shifts to Vodafone Kenya — and ultimately to its South African parent — the company's leadership must continue to reflect a Kenyan identity at the senior management and executive committee levels, addressing concerns that the sale to foreign investors could erode local employment and influence. Despite losing majority control, the government has secured explicit veto rights over two critical areas.

First, on brand changes, the government must consent to any material change to Safaricom's brand identity. Even if 75 per cent of the board votes in favour of a rebrand, the resolution fails without the government's explicit approval. Second, on geographic expansion, the government holds an absolute block on Safaricom entering any new country beyond Kenya and Ethiopia.

This means the company cannot expand into any other territory outside these two nations without the government's consent.

The amended Article 102 states: "any resolution relating to (i) any material change of the Company's brand shall not be deemed to have been passed unless ... the consent of the Government of Kenya has been obtained and (ii) the expansion of the business of the Company into new territories outside of Kenya and Ethiopia shall not be deemed to have been passed unless the consent of the Government of Kenya has been obtained."

The government therefore does not have a general veto over ordinary business, operations, budgets, or CEO appointments. The CEO nomination power is granted exclusively to Vodafone Kenya Limited under Special Resolution 9.

The government's veto is strictly limited to branding and new territory expansion outside Kenya and Ethiopia. Under the proposed changes, both Vodafone Kenya and the government are entitled to appoint one director per complete 10 per cent shareholding.

Special Resolution 5 amending Article 89(b) states: "VKL shall have the right to appoint, remove or replace one Director as its nominee in respect of each and every complete (10%) held by VKL of the issued and fully paid share capital of the Company excluding any shares hereafter issued pursuant to any share issuance to Article 13(c)."

A new deadlock resolution mechanism introduced by Special Resolution 10 (new Article 116A) would give VKL- and government-appointed directors the deciding vote in persistent board stalemates: "In the event that, after the Board considering the deadlocked matter again, the matter remains deadlocked, the decision of the Board in respect of that deadlocked matter shall be the decision that was approved by the majority of the Directors appointed in terms of article 89(b) and 89(c) that voted on such deadlocked matter (on the second round of consideration). The Board and Company shall be bound by the decision of such majority."

Special Resolution 4, amending Article 89(a), sets the board minimum at seven directors with no maximum, and requires that a majority of independent non-executive directors be Kenyan citizens: "Unless and until otherwise from time to time determined by a special resolution of the Company, the number of Directors (excluding alternates) shall not be less than seven (7) and shall include Independent non-executive Directors a majority of who shall be of Kenyan citizenship."

Special Resolution 11 amends Article 117 to set the board quorum as "a majority in number of the Directors for the time present either personally or by Alternate." Shareholders are in line for a record dividend payout for the financial year ended March 2026.

The dividend will be payable on or about 4 September 2026 to shareholders on the register of members as at the close of business on 4 August 2026. The AGM will be conducted virtually on 31 July 2026 at 11:00 a.m., with shareholder registration closing on 29 July 2026.