Kenya Moves to Partially Exit Safaricom: Inside the KSh204 Billion State Divestiture Plan

The Government of Kenya has taken a decisive step toward reshaping its role in the country’s most valuable company. In January 2026, the National Treasury formally sought parliamentary approval to partially divest the State’s shareholding in Safaricom PLC, proposing the sale of a 15 per cent stake in the telecommunications giant. If approved and executed, the transaction would raise approximately KSh204.3 billion in gross proceeds—one of the largest single asset sales ever undertaken by the Kenyan government.

The proposed deal would reduce the State’s ownership in Safaricom from 35 per cent to 20 per cent, while significantly increasing the stake held by Vodacom Group, the firm’s long-standing strategic investor. Treasury officials have framed the move as both a fiscal necessity and a strategic recalibration, designed to unlock value from a mature asset while preserving national interests through board representation and governance safeguards.

At its core, the proposal reflects the mounting pressures facing Kenya’s public finances, the evolving capital needs of Safaricom, and a broader policy shift toward selective privatization under the recently enacted Privatisation Act, 2025.

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A High-Stakes Presentation to Parliament

Appearing before a joint committee of the National Assembly in January 2026, John Mbadi, Cabinet Secretary for the National Treasury, laid out the rationale behind the proposed divestiture. He told lawmakers that selling a 15 per cent stake would allow the government to raise substantial funds without increasing public debt, at a time when fiscal space has become increasingly constrained.

Under the proposal, the government would retain a 20 per cent strategic stake in Safaricom and maintain two board seats, ensuring continued influence over key decisions affecting national interests, including network infrastructure, data governance, and regional expansion.

Mbadi emphasized that the State does not intend to exit Safaricom entirely. Instead, the transaction is designed to rebalance ownership in a way that aligns with Safaricom’s long-term capital requirements while reducing the risk of future dilution for the government.

Deal Structure: Premium Pricing and Strategic Buyer

According to Treasury disclosures, the transaction will be executed as a direct sale to Vodacom Group, Safaricom’s existing strategic investor, at a negotiated price of KSh34 per share. This price represents a 23.6 per cent premium to the six-month volume-weighted average price (VWAP) of KSh27.50, calculated up to December 2, 2025.

In total, the government plans to sell 6,009,814,200 shares, equivalent to 15 per cent of Safaricom’s issued share capital. At KSh34 per share, the sale would generate approximately USD 1.57 billion, or KSh204.3 billion, payable in hard currency.

The use of a negotiated, premium-priced transaction rather than an open-market sale is intended to minimize market disruption and lock in value amid volatile global capital markets.

Why Vodacom?

Vodacom currently holds about 40 per cent of Safaricom through Vodafone Kenya and has been a shareholder since 1998, long before Safaricom became Kenya’s dominant telecommunications provider. Over the past quarter-century, Vodacom has played a central role in Safaricom’s technical development, management systems, and capital investments.

If the transaction is completed, Vodacom’s ownership would rise to 55 per cent, consolidating its position as the controlling shareholder. Treasury officials argue that this consolidation provides stability and clarity in ownership, particularly as Safaricom continues to expand into new markets and technologies.

By contrast, Safaricom’s main competitor in the Kenyan market has changed ownership four times over the past 25 years, a level of instability that Treasury officials cited as a cautionary example of the risks associated with fragmented or uncertain ownership structures.

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Valuation: How KSh34 Was Reached

One of the most closely scrutinized aspects of the proposal is the valuation. Treasury provided Parliament with a breakdown of multiple valuation methodologies used to assess Safaricom’s fair value:

• Earnings-based valuation: KSh26 per share
• Price-to-earnings model: KSh17 per share
• Discounted cash flow (DCF): KSh18.51 per share
• Discounted dividend model (DDM): KSh23.61 per share
• Six-month VWAP: KSh27.50 per share

The average price recommended by leading investment banks advising on the transaction stood at KSh30.82 per share. However, after negotiations with Vodacom concluded, both parties agreed on KSh34, a level the Treasury says fairly compensates the State while reflecting Safaricom’s strategic value and growth prospects.

At this price, the government estimates actual proceeds of KSh204.3 billion, making it one of the most lucrative privatization-linked transactions in Kenya’s history.

Dividend Monetisation: An Upfront Cash Injection

Beyond the share sale itself, the deal includes a dividend monetisation component that further boosts near-term government revenues. Vodacom has agreed to make an upfront payment of KSh40 billion to the government, in lieu of dividends that would otherwise be payable on the State’s retained 20 per cent stake over the coming years.

Treasury estimates that, absent this arrangement, the government would have received approximately KSh55 billion in dividends over the next six years. However, Mbadi argued that when those future dividends are discounted at prevailing market rates, their present value falls to about KSh29.3 billion.

From this perspective, the upfront KSh40 billion payment represents a KSh10 billion advantage to the State in present-value terms.

Present Value vs Future Value: Treasury’s Case

Mbadi went further, framing the dividend advance as favorable even when assessed on a future-value basis. He told lawmakers that if the government were to invest the KSh40 billion upfront payment at prevailing market rates, it could grow to approximately KSh75 billion over six years.

In contrast, the projected dividend stream of KSh55 billion over the same period would be worth significantly less in future-value terms. “The proposed repayment of KSh55 billion is about KSh20 billion lower than the fair future value,” Mbadi said, concluding that the transaction favors the Government of Kenya both in present value and future value terms.

Including the dividend monetisation, Treasury estimates total proceeds of approximately KSh244.5 billion from the transaction.

Legal and Regulatory Framework

The divestiture is being carried out under the Privatisation Act, 2025, and Section 87A of the Public Finance Management Act, which requires that such transactions be subjected to parliamentary consideration within 28 sitting days.

Treasury officials stressed that the process complies with all statutory requirements and reflects lessons learned from past privatization efforts, many of which were criticized for lack of transparency or weak value realization.

Parliament’s role will be to scrutinize not only the financial terms but also the strategic implications of reducing State ownership in a company that plays a critical role in Kenya’s digital economy.

Why the Government Is Selling Now

Beyond immediate revenue needs, Treasury framed the divestiture as a risk-mitigation strategy. Mbadi warned that as Safaricom continues to evolve—particularly in areas such as data services, fintech, and regional expansion—the company may require substantial capital injections.

“In an environment of eroding fiscal space, companies that are fully or heavily controlled by the government may not be able to undertake necessary investments, even where there is clear certainty of payoff,” he told the committee. With Kenya’s sovereign debt capacity under pressure, the State could struggle to participate in future capital raises, exposing it to dilution risk.

By partially exiting now at a premium valuation, the government reduces its exposure to future funding obligations while retaining a meaningful strategic stake.

Market Implications and Investor Reaction

Safaricom is the single most influential stock at the Nairobi Securities Exchange, accounting for a significant share of market capitalization and trading liquidity. Any change in its ownership structure therefore carries broader market implications.

Treasury has argued that a negotiated sale to an existing shareholder minimizes disruption compared to a large secondary market offering, which could depress prices and unsettle investors. However, the prospect of increased Vodacom control and reduced State ownership will inevitably prompt debate about corporate governance, competition, and national interest safeguards.

A Strategic Rebalancing, Not an Exit

Treasury officials have been keen to emphasize that the proposed transaction does not represent a retreat from strategic assets, but rather a rebalancing of the State’s portfolio. By retaining 20 per cent ownership and board representation, the government intends to remain an influential shareholder while freeing up capital for other priorities.

In a fiscal environment characterized by rising debt service costs and limited borrowing headroom, unlocking value from mature, well-performing assets has become an increasingly attractive option.

Conclusion: A Defining Test for Kenya’s Privatization Strategy

The proposed sale of a 15 per cent stake in Safaricom marks a pivotal moment in Kenya’s economic policy. At KSh204.3 billion—rising to KSh244.5 billion when dividend monetisation is included—the transaction offers a rare opportunity to raise substantial non-debt funding while maintaining strategic influence in a cornerstone company.

Whether Parliament endorses the deal will depend on its assessment of value for money, long-term national interests, and governance safeguards. What is clear, however, is that the Safaricom divestiture has become a defining test of Kenya’s new privatization framework—and a signal of how the State intends to navigate the balance between ownership, influence, and fiscal sustainability in the years ahead.

photo source: Google

By: Elsie Njenga

20th January, 2026