Delays in the Kenyan government’s planned sale of its 15 percent stake in Safaricom to South Africa’s Vodacom, resulting from pending legal proceedings, are expected to yield the Treasury an unexpected gain of Sh16.1 billion in dividends. The government, through the Treasury, was initially set to reduce its holding in the telecommunications operator from 35 percent to 20 percent. However, as a court case continues to drag out the sale process, the State is likely to retain its full 35 percent stake which is equivalent to 14 billion shares, for a longer period. Consequently, the government will now receive dividends from the 15 percent portion that would otherwise have been transferred to Vodacom.
The parties to the transaction had initially anticipated to conclude the KES 244.5 billion deal by March 31, which would have excluded the government from earning a final dividend of KES 1.15 per share on the 15 percent stake. Safaricom declared this dividend on Thursday for the financial year ending March 31. The sale could now be delayed beyond August 4, 2026, the date on which Safaricom closes its books for the final dividend payout. Under the original terms, the State was set to raise KES 244.5 billion for the exchequer, comprising KES 204.3 billion from the sale of 6.0 billion shares at KES 34 per share, plus an advanced dividend of KES 40.2 billion.
The transaction was frozen after petitioners Tony Gachoka and Fredrick Ogola filed a suit against several State agencies, Safaricom Plc, and Vodacom Group, challenging the legality of the government’s plan to reduce its stake. Two additional petitions were submitted by Paul Maina and an individual identified only as Mr. Samuel. At the end of March, the High Court referred the petitions to Chief Justice Martha Koome to appoint a multi-judge bench, after the judge originally assigned to the case stepped aside due to time constraints.
The proposed sale to Vodacom has sharply divided opinion in Kenya, with analysts and politicians debating its merits. While some argue the deal benefits Kenya, others express skepticism, contending that Vodacom would be the primary winner by acquiring full control of a highly cash-generative subsidiary. Despite the controversy, a joint parliamentary committee has approved the sale, paving the way for its conclusion. Meanwhile, the Safaricom board has commended shareholders for remaining calm amid the ongoing deliberations. Adil Khawaja, the board chairman, noted that once concluded, the transaction would position Safaricom to leverage greater scale and deeper regional expertise.
Safaricom Share Sale Agreement Silent on Treasury’s Dividend Rights
However, the National Assembly’s committees on National Planning and Finance, and Public Debt & Privatisation observed that the sale agreement and the Treasury’s Sessional Paper presented to Parliament were unclear on whether the Treasury would receive dividends from the 15 percent stake if the deal closed after Safaricom’s financial year in March.
The joint committee’s report stated that the Sessional Paper does not clearly specify entitlement to dividends declared for the 2025 financial year. It further noted that the transaction must specify whether it is on an ex-dividend basis, where the buyer does not receive the dividend, or a cum-dividend basis, where the buyer does. Safaricom has already declared an interim dividend of KES 0.85 per share for the current year, paid on March 31 to shareholders on the books as of February 25.
Upon completion, the government’s stake in Safaricom will drop from 35 percent to 20 percent. Concurrently with the purchase of the 15 percent stake from the government, Vodacom is also buying a five percent stake held by the parent firm, Vodafone Group, at the same price of KES 34 per share. Once both deals are sealed, Vodacom will raise its ownership to 55 percent, attaining majority control. Other investors hold a 25 percent stake, equivalent to 10 billion shares, which were offloaded in an initial public offering in March 2008.
Last week, Safaricom raised its final dividend to KES 1.15 per share from KES 0.65 previously, following a 36.9 percent rise in net profit to KES 95.6 billion for the financial year ending March 31. The cumulative KES 46 billion dividend will be approved at the annual general meeting on July 31 and paid by September 4 to shareholders on the register by August 4. The total dividend for the year translates to KES 80.13 billion, or KES 2 per share, aligning with the company’s policy of paying out 80 percent of its earnings.
Proceeds from the 15 percent State stake sale are expected to form seed capital for the newly established National Infrastructure Fund, which currently holds proceeds from the Kenya Pipeline Company’s IPO conducted in March. The Treasury has indicated there is no rush to unlock the sale proceeds, as the funds are not intended for budget support. Cabinet Secretary John Mbadi stated that the budget would be implemented as usual regardless of the timing, while expressing confidence that the transaction would be completed quickly, subject to respect for the independence of the judiciary.
