Kenya’s CDSC immobilizes 16B Safaricom shares 

The Central Depository and Settlement Corporation (CDSC) has successfully completed the immobilisation of an astounding 16 billion Safaricom PLC shares belonging to Vodafone Limited. This monumental shift, announced on Monday, June 9, 2025, now brings the total number of Safaricom shares held in electronic format to 40 billion, up from a previous 24 billion. This pivotal move is set to profoundly ease the trading of Safaricom PLC shares at the Nairobi Securities Exchange (NSE), enhancing market liquidity, transparency, and investor confidence.

The immobilisation of such a substantial block of shares, particularly from a company as pivotal as Safaricom, is more than just a numerical milestone; it represents a deepening commitment to modernising Kenya’s capital markets and aligning them with global best practices. It’s a testament to the growing trust in CDSC’s robust infrastructure and a clear message that Kenya is paving the way for a more efficient and secure investment landscape.

Understanding Share Immobilisation: The Digital Transformation of Ownership

At its core, immobilisation, often referred to as dematerialisation, is the process of converting physical share certificates into an electronic, book-entry format. Historically, share ownership was represented by paper certificates – tangible documents that investors would receive and hold as proof of their stake in a company. While romantic in their physicality, these certificates came with a host of inherent problems that modern capital markets are eager to shed.

The Challenges of Physical Certificates: A Relic of the Past

Before the advent of dematerialisation, holding physical share certificates posed numerous risks and inefficiencies for investors and the market as a whole. These included:

• Risk of Loss, Theft, or Damage: Paper certificates could easily be lost, stolen, or damaged by fire, water, or general wear and tear. Replacing a lost certificate was a cumbersome, time-consuming, and often costly process, involving police reports, newspaper advertisements, indemnity bonds, and affidavits as detailed by Infinysolutions. This uncertainty created significant anxiety for investors.
• Forgery and Fraud: Physical certificates were susceptible to forgery, leading to fraudulent transactions and disputes over ownership. The manual verification processes were vulnerable to errors and manipulation, undermining market integrity.
• Delayed Transfers and Trading: The transfer of ownership for physical shares involved a lengthy process of physically exchanging certificates, verifying signatures, and updating company registers. This created significant delays in settlement, prolonging the period between a trade being executed and ownership being finalised, thus tying up capital and hindering market liquidity.
• High Transaction Costs: The administrative burden associated with handling physical certificates, including stamp duties, courier charges, and processing fees, added to the overall cost of transactions.
• Complexity in Record Keeping: Investors had to meticulously manage their physical documents, track dividend payments, and reconcile their holdings, which could be a daunting task, particularly for those with diverse portfolios.
• Issues Related to Inheritance and Succession: Transferring shares to heirs after the death of a shareholder was a complex and often protracted legal process when dealing with physical certificates, especially if proper nominations were not in place.

The Benefits of Dematerialisation: Efficiency, Security, and Accessibility

The global shift towards dematerialisation, which began in earnest in the late 20th century in developed markets, aimed to eliminate these drawbacks. For Kenya, the operationalization of the Central Depositories Act in June 2003 and the subsequent establishment of the CDSC were pivotal steps in this transformation.

Dematerialisation offers a myriad of benefits for individual investors and the capital market alike as outlined by Bajaj Finserv:

• Enhanced Security: Electronic holdings eliminate the risks of physical loss, theft, or damage. Shares are held securely in a digital format within a central depository system, providing a robust safeguard against fraud.
• Ease of Trading and Transfer: Trading electronic shares is instantaneous and seamless. When shares are bought or sold, ownership is transferred electronically, significantly reducing settlement times. The NSE, for instance, operates on a T+3 settlement cycle (trade date plus three business days), which is in line with international standards, ensuring swift finalisation of transactions.
• Reduced Paperwork and Costs: The elimination of physical certificates dramatically cuts down on administrative burdens, paperwork, and associated costs like stamp duties and courier fees. This makes investing more cost-effective and environmentally friendly.
• Improved Liquidity: Faster settlements and easier transfers mean that shares can be traded more frequently, enhancing market liquidity. This makes it easier for investors to buy and sell shares at fair prices, attracting more participants to the market.
• Transparency and Efficiency: Digital records provide a clear, immutable audit trail of all transactions, enhancing market transparency and reducing opportunities for malpractice. The efficiency gained contributes to a more orderly and predictable market environment.
• Convenience and Accessibility: Investors can manage their holdings from anywhere, at any time, using online platforms or mobile applications. This makes investing more convenient and accessible, particularly for retail investors who may not have easy access to physical brokerages.
• Simplified Corporate Actions: Dividends, bonus shares, stock splits, and other corporate benefits are automatically credited to the investor’s electronic account, eliminating the need for manual processing and ensuring timely receipt of entitlements.
• Collateral for Loans: Shares held in electronic format can be easily pledged as collateral for loans, offering investors additional financial flexibility.

The successful immobilisation of 16 billion Safaricom shares by CDSC is a powerful affirmation of these benefits and a strategic move to bring Kenya’s capital market further into the digital age.

The Central Depository and Settlement Corporation (CDSC): Kenya’s Market Backbone

The Central Depository and Settlement Corporation (CDSC) is a cornerstone of Kenya’s capital market infrastructure. Incorporated in March 1999 and operationalised in June 2003 under the Central Depositories Act 2000, CDSC serves as Kenya’s premier securities depository. It is authorised by the Capital Markets Authority (CMA) to provide automated clearing, settlement, and delivery services for transactions executed at the Nairobi Securities Exchange (NSE).

CDSC’s role extends far beyond merely holding shares electronically. It functions as the secure central custodian for listed and non-listed securities, maintaining comprehensive and up-to-date registers of securities holders. The corporation conducts monthly reconciliations with share registrars to ensure accuracy and compliance, thereby upholding the integrity and security of Kenya’s capital markets.

Key services offered by CDSC, as detailed on its official profile, include:

• Depository Services: Secure custody of electronic shares in investors’ Central Depository System (CDS) accounts.
• Clearing and Settlement: Facilitating the swift and efficient settlement of trades, ensuring that ownership changes hands seamlessly and securely (T+3 cycle).
• Securities Lending and Borrowing (SLB): Allowing investors to lend out their shares to earn interest income or borrow shares for short-selling strategies, enhancing market liquidity and investment opportunities.
• Digital Account Management: Enabling investors to manage their CDS accounts online, update information, and track their portfolios.
• Share Transfers: Facilitating smooth ownership transitions, whether between stockbrokers, custodian banks, or through private transfers (e.g., inheritance, gifts).
• Pledging and Release of Shares: Allowing investors to use their securities as collateral for credit facilities.
• Corporate Actions Management: Working with issuers to provide entitlement schedules and facilitate the seamless processing of corporate benefits.

CDSC’s unwavering commitment to embracing technology and global best practices has been instrumental in fostering investor confidence and driving Kenya’s capital market growth. The immobilisation of the 16 billion Safaricom shares alone represents one of the largest single-company share digitisation events in the region’s history as reported by Envestreet Financial, showcasing CDSC’s strategic leadership in modernising market infrastructure across East Africa. With 97 billion immobilised shares, representing 95% of Kenya’s total equity market, CDSC stands as one of the largest depository systems in Africa, serving over 1.5 million investors.

Safaricom: A Cornerstone of the Kenyan Economy and NSE

Safaricom PLC is not just a telecommunications company; it is an economic powerhouse and a cornerstone of Kenya’s digital and financial landscape. Its sheer scale and influence make it arguably the most strategically important company listed on the Nairobi Securities Exchange (NSE).

Market Dominance and Diversified Services

Safaricom maintains an unparalleled dominant position in Kenya’s telecommunications sector, boasting a commanding 66% market share in GSM services and a network that covers an impressive 98% of the population. This extensive reach is supported by a robust infrastructure, including over 18,300 km of fiber optic networks and 694,000 homes passed with Fibre To The Home (FTTH), solidifying its position as the leading broadband provider in the country. The company serves over 37 million active customers, connecting Kenyans to vital digital services.

Beyond traditional voice and data, Safaricom’s strategic importance is inextricably linked to M-PESA, its groundbreaking mobile money platform. M-PESA is more than just a payment system; it’s a financial ecosystem that supports over 35 million active users and handles an astounding 37.15 billion transactions annually, with a total transaction value of KES 38.29 trillion. It contributes over 8% to Kenya’s GDP and has sustained over 1 million jobs annually through its vast network of agents, developers, and dealers as highlighted in an analysis by Moses Kemibaro. M-PESA has become a critical enabler of financial inclusion, offering services ranging from peer-to-peer transfers and digital lending to savings and international remittances, making it an indispensable part of daily life for millions of Kenyans.

Stellar Financial Performance

Safaricom’s financial performance further underscores its robust health and pivotal role. During the financial year 2024/25, the company made history by becoming the first listed entity in the East African region to cross the KSh 300 billion mark in revenue, reporting a total revenue of KSh 388.7 billion. Its profit increased from KSh 42.6 billion to KSh 45.8 billion, with net income growing by 10.8% to KSh 68.8 billion in Kenya. Even with a significant KSh 153.8 billion foreign exchange translation loss from its Ethiopian operations (due to the weakening Ethiopian Birr), Safaricom still posted a robust group profit after tax of KSh 45.76 billion, demonstrating the resilience of its core Kenyan business as reported by Kenyan Wall Street.

The company’s commitment to shareholders is evident in its dividend payments. Safaricom paid out KSh 48.08 billion in dividends for the financial year, comprising a final ordinary share payment of 65 cents and an interim payment of 55 cents. Given the Kenyan government’s significant 35% stake in Safaricom, this translated into a substantial KSh 7.7 billion in interim dividends paid to the Treasury, underscoring Safaricom’s contribution to national coffers.

The decision by Vodafone Limited to immobilise its 16 billion shares is particularly significant because Vodafone (through its subsidiaries) is a major shareholder in Safaricom. Their trust in CDSC’s electronic system sends a powerful signal to other institutional and retail investors, reinforcing confidence in the security and efficiency of Kenya’s dematerialised market.

Direct Benefits for the Kenyan Investor: A Smoother Journey in the Market

The immobilisation of Safaricom shares translates into tangible, everyday benefits for Kenyan investors, making participation in the stock market more appealing and less daunting.

• Unlocking Liquidity: The 16 billion shares, previously held in certificate form, had limited trading and transferability. Converting them to electronic format has “significantly enhance Safaricom PLC shares’ liquidity and overall market transparency and efficiency,” as stated by CDSC. This means investors can now buy and sell these shares much more easily and quickly, increasing trading volumes and ensuring fair price discovery.
• Reduced Risks for Individual Investors: For the average Kenyan investor, the shift away from physical certificates is a major relief. The fear of losing a precious paper document, the hassle of getting a duplicate, or the risk of fraudulent activity are virtually eliminated. Their ownership is now securely recorded in a digital ledger managed by CDSC.
• Simplified Access to Market Opportunities: With shares in electronic format, investors can execute trades through online platforms or mobile apps offered by stockbrokers. This digital access democratises investing, allowing Kenyans from various regions to participate in the stock market without needing to physically visit a broker’s office.
• Faster and More Reliable Payouts: Dividends and other corporate benefits are automatically credited to an investor’s linked bank account. This eliminates delays and the potential for lost physical dividend cheques, ensuring that investors receive their returns efficiently.
• Streamlined Processes for All: The entire lifecycle of a share—from purchase to sale, and all corporate actions in between—becomes faster and less bureaucratic. This efficiency saves investors time, effort, and money.

CDSC CEO Jesse Kagoma emphasised that this milestone “is not only a numeric achievement, but also a demonstration of growing institutional trust in CDSC’s infrastructure. It is also a major stride in aligning with international best practices.” This sentiment highlights the dual benefit: improved operational efficiency for the market and enhanced confidence for those who invest in it.

The Nairobi Securities Exchange (NSE) in the Digital Age

The Nairobi Securities Exchange (NSE) stands as the premier stock exchange in Kenya and a significant player in the East African financial landscape. Founded in 1954, the NSE has a rich history of facilitating the trading of equity and debt securities. It demutualised and self-listed in 2014, showcasing its commitment to modern governance and market development.

The NSE plays a vital role in Kenya’s economy by encouraging savings and investment, and by helping local and international companies access cost-effective capital for growth. It operates under the regulatory oversight of the Capital Markets Authority (CMA) and is a full member of the World Federation of Exchanges and a founder member of the African Securities Exchanges Association (ASEA).

Digital Transformation as a Catalyst

The digital transformation of the NSE, epitomized by initiatives like share immobilisation, is critical for its continued growth and regional competitiveness. In the early 2000s, the NSE moved from a manual “open outcry” system to an automated trading system (ATS) in 2006, which also had the capability of trading immobilised corporate and treasury bonds. This technological leap, coupled with the establishment of CDSC, has fundamentally changed how securities are traded and settled in Kenya.

The ongoing digital efforts on the NSE, such as the immobilisation of 95% of total equity market shares, address key investor pain points and enhance the market’s appeal:

• Increased Market Efficiency: Automated systems and electronic shareholdings significantly reduce processing times, minimize human error, and streamline post-trade operations.
• Attracting International Capital: Global institutional investors prefer markets with robust, digitised infrastructure and efficient settlement systems. Kenya’s progress in immobilisation makes the NSE more attractive for foreign direct and portfolio investment.
• Promoting Financial Inclusion: Digital platforms and simplified processes lower barriers to entry for retail investors, fostering broader participation in the capital market. Initiatives to allow digital account opening further exemplify this trend.
• Resilience and Stability: A digitised system is more resilient to disruptions and provides better data for real-time surveillance, enabling regulators to maintain market integrity and stability.

As global capital flows increasingly favor markets with robust, digitized infrastructure, the CDSC’s role becomes even more pivotal. “Such reforms enhance Kenya’s competitiveness as a capital markets hub in the region,” noted a senior market analyst, suggesting that by removing legacy inefficiencies, the country becomes more attractive to both institutional and retail investors, including those from the diaspora.

Broader Implications for Kenya’s Capital Market

The immobilisation of Safaricom shares, while a specific event, carries significant broader implications for the development and maturity of Kenya’s capital market.

• Deepening Market Liquidity and Depth: The increased availability of electronically traded shares, particularly for a highly sought-after stock like Safaricom, injects significant liquidity into the market. This allows for larger trades to be executed with minimal price impact, appealing to institutional investors.
• Boosting Investor Confidence: The move underscores the safety and reliability of Kenya’s electronic shareholding system. When a major international entity like Vodafone trusts CDSC with 16 billion shares, it sends a powerful message of confidence to other investors, both local and international.
• Facilitating Corporate Actions and Listings: A streamlined and efficient electronic system makes it easier for companies to undertake corporate actions (e.g., rights issues, bonus issues, stock splits) and for new companies to list on the exchange. This supports capital raising for businesses and creates more investment opportunities.
• Regional Leadership: Kenya’s ongoing efforts in modernising its capital markets, spearheaded by the CDSC and CMA, position it as a leader in financial innovation within East Africa. This progress can serve as a benchmark and inspire other regional exchanges.
• Economic Contribution: A vibrant and efficient capital market plays a crucial role in economic development. It facilitates capital formation, directs savings into productive investments, and provides a platform for wealth creation, thereby contributing to national economic growth and job creation. The Capital Markets Authority (CMA), established in 1989, is explicitly mandated to regulate and promote the development of orderly, fair, and efficient capital markets in Kenya, with a vision to be a world-class regulator. Its functions include licensing intermediaries, supervising conduct, regulating product issuance, promoting market development through research, and championing investor education.

The Human Element: Making Investment Accessible

Beyond the technical jargon of immobilisation and market metrics, the true impact of this development is on the individual Kenyan. For generations, investing in the stock market felt distant and complicated, often associated with cumbersome paperwork and the perceived risks of physical certificates. The digitisation efforts, highlighted by this Safaricom milestone, are fundamentally changing that perception.

Imagine a young professional in Eldoret or a farmer in Kisumu, now able to easily open a CDS account, access market information on their smartphone, and buy or sell shares in Kenya’s largest company with just a few taps. The removal of physical barriers, the reduction of administrative hurdles, and the enhancement of security make participation in the stock market more intuitive and less intimidating. This shift fosters greater financial inclusion, enabling more Kenyans to participate directly in the nation’s economic growth and build wealth through legitimate investment channels. It’s about empowering individuals to take control of their financial futures, transforming a seemingly abstract financial market into a tangible avenue for personal prosperity. This “digital divide” is slowly being bridged, making investing accessible to more Kenyans.

Call to Action for Investors

While the majority of shares in Kenya’s equity market are now immobilised, some investors still hold physical share certificates. The CDSC continues to urge these investors to engage with their stockbrokers and registrars for facilitation and guidance on how to immobilise them. This ongoing effort is crucial to fully realise the benefits of a completely dematerialised market, ensuring that no investor is left behind in this digital transformation.

Conclusion: A Clear Path to a Modern Financial Future

The immobilisation of 16 billion Safaricom shares by the CDSC is a landmark achievement, not just for Safaricom or the CDSC, but for the entire Kenyan capital market. It solidifies Kenya’s position as a leader in financial infrastructure development in East Africa, demonstrating its commitment to fostering a secure, efficient, and transparent investment environment.

This move dramatically improves the accessibility and liquidity of Safaricom shares, a company that is undeniably intertwined with the daily lives and economic aspirations of Kenyans. By embracing digital transformation, Kenya is paving a clear path towards a modern financial future, attracting greater investment, boosting market confidence, and ultimately empowering its citizens with easier, safer, and more effective ways to participate in the nation’s economic prosperity. This is a critical step towards realizing the full potential of Kenya’s capital markets as a engine for sustainable growth.

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photo source: Google

By: Montel Kamau

Serrari Financial Analyst

10th June, 2025