Safaricom Dealers Voice Opposition to Government Sale

Safaricom dealers across Kenya have raised strong objections to the government's plan to sell a 15 percent stake in the telecommunications giant to Vodacom Group. The Kenya Revenue Authority confirmed the sale is in its final stages, pending regulatory and parliamentary approvals. If approved, the State would sell 6 billion shares at Sh34 per share, raising approximately Sh204.3 billion.

Dealers expressed their concerns in meetings with the Communications Authority of Kenya this week. They argue the sale could disrupt Safaricom's market dominance and local partnerships. One dealer from Nairobi said, "This move threatens our livelihoods and the ecosystem we've built." The dealers represent thousands of small businesses that rely on Safaricom's M-PESA and network services.

Why the Government is Proceeding with the Sale

The Kenyan government owns 35 percent of Safaricom through the National Treasury. Officials view the sale as a strategic move to raise funds for infrastructure projects. The Sh204.3 billion would support the government's budget deficit, estimated at Sh1.1 trillion for the 2024 fiscal year. The sale requires approval from the Capital Markets Authority and Parliament's Finance Committee.

Vodacom Group, majority-owned by Vodafone, already holds a 5 percent stake in Safaricom. Acquiring the additional 15 percent would give Vodacom significant influence. Vodacom operates in several African markets, including Tanzania and South Africa. The company reported revenue of 150 billion South African rand in 2023.

Why It Matters

This sale matters because Safaricom is Kenya's largest company by market capitalization. The Nairobi Securities Exchange lists Safaricom at Sh1.36 trillion. Any change in ownership could affect market stability. Safaricom employs over 6,000 people directly and supports 500,000 indirect jobs through its dealer network.

The telecommunications sector contributes 8 percent to Kenya's GDP, according to the Communications Authority of Kenya. Safaricom controls 65 percent of the mobile market share. Its M-PESA service processes transactions worth Sh8.5 trillion annually. A shift in ownership might alter service pricing and innovation strategies.

What Businesses Should Watch

Businesses should monitor three key areas. First, watch for the Capital Markets Authority's decision on the sale. The CMA must ensure the transaction complies with Kenya's competition laws. Second, track parliamentary debates in the Finance Committee. Approval could come within the next 60 days.

Third, observe Vodacom's integration plans if the sale proceeds. Vodacom might streamline operations or introduce new products. Companies like Equity Bank and KCB Group, which partner with Safaricom, should assess potential impacts on their digital banking services. The sale could also influence stock prices for Safaricom and Vodacom on their respective exchanges.

Market Reactions and Future Outlook

Initial market reactions have been cautious. Safaricom's share price remained stable at Sh34 this week. Analysts note the sale price matches the current trading value. The Nairobi Securities Exchange reported average daily trading volume of 10 million Safaricom shares in March 2024.

The future outlook depends on regulatory approvals. If approved, Vodacom would increase its stake to 20 percent, becoming the second-largest shareholder after the Kenyan government. This could lead to board representation and strategic shifts. Dealers plan to lobby MPs to block the sale, citing concerns over foreign control.

Kenya's telecommunications landscape may see increased competition. Rivals like Airtel Kenya and Telkom Kenya could benefit from any dealer dissatisfaction. The Communications Authority of Kenya will review the sale's impact on market fairness. Businesses should prepare for potential changes in mobile money and data services by mid-2024.