Government to Sell Off Major Safaricom Stake in Sh149 Billion Revenue Drive

The Kenyan government is preparing to sell a significant portion of its shareholding in telecommunications giant Safaricom Plc as part of an ambitious privatization program aimed at raising Sh149 billion in the 2025/26 financial year.

Treasury Cabinet Secretary John Mbadi revealed that Safaricom represents the government’s best opportunity to achieve this substantial revenue target, particularly as the administration seeks alternative funding sources after avoiding new tax measures in the current Finance Bill.

The state currently holds a 34.9 percent stake in the Nairobi Securities Exchange-listed company, valued at approximately Sh280.5 billion based on current market prices.

This holding dates back to Safaricom’s highly successful initial public offering in 2008, when the government sold 25 percent of its shares for Sh51.75 billion in what became one of Africa’s most oversubscribed IPOs at 532 percent.

According to market analysts, the government is weighing several divestiture approaches.

A partial sale of between 5 to 10 percent of the state’s current holding could generate between Sh39.8 billion and Sh79.7 billion at the current share price of Sh19.90.

Wesley Manambo, Senior Research Associate at Standard Investment Bank, advocates for an off-market transaction rather than a public offering, citing current market undervaluation.

“The most prudent approach would be an off-market transaction to high-net-worth investors like private equity funds that typically offer premiums to market prices,” Manambo explained.

The proposed sale comes at a time when global private equity firms are increasingly targeting African telecommunications assets, attracted by their predictable revenue streams and stable cash flows that can service acquisition debt.

Safaricom’s robust financial performance strengthens the government’s position for the planned divestiture. The company recently reported a 7.2 percent increase in net profit to Sh45.7 billion for the financial year ending March 2025, up from Sh42.6 billion the previous year.

The telecommunications operator has proposed a total dividend of Sh1.20 per share, comprising a final dividend of Sh0.65 and an interim payment of Sh0.55.

This dividend payout translates to Sh16.8 billion for the Treasury, representing significant annual income that the government would partially forfeit following any stake reduction.

Management projects potential earnings growth of up to 50 percent in the current financial year, driven largely by improving performance in Ethiopia, where Safaricom launched operations in 2022.

Despite initial challenges including security concerns, inflation, and currency volatility, the company remains optimistic about the long-term potential of Africa’s second-most populous nation.

The emphasis on Safaricom reflects the limited pool of viable state-owned enterprises available for privatization.

Most government-controlled entities have struggled with years of losses and mismanagement, making them unsuitable for immediate divestiture.

Kenya Pipeline Company emerges as the only other significant candidate that could contribute meaningfully toward the Sh149 billion target.

“KPC is ready because it is profit-making and already structured as a limited liability company,” Mbadi noted, confirming that privatization documents have been signed.

The planned sale would mark Kenya’s first major privatization since Safaricom’s 2008 IPO, representing a potential watershed moment for the country’s capital markets.

The transaction’s structure—whether through secondary public offering or private placement—will likely influence pricing and market participation.

Analysts suggest that current interest rate trends could favor retail investor participation if the shares are offered at a meaningful discount.

However, concerns remain about potential oversupply effects on market pricing if the offering is conducted through public markets.

The privatization proceeds will support the government’s Sh4.2 trillion budget, which relies on Sh3.3 billion in tax revenues and ministerial levies. Parliamentary approval for the overall expenditure framework remains pending.

As global appetite for African telecommunications assets continues growing, the Safaricom stake sale positions Kenya to capitalize on international investor interest while addressing immediate fiscal pressures through one of the region’s most successful corporate divestiture programs.​​​​​​​​​​​​​​​​