Kenya Plans Major Safaricom Stake Sale to Raise KES 149 Billion

The Kenyan government is preparing for its most significant privatization move in nearly two decades, with plans to sell a substantial portion of its 34.9% stake in telecom giant Safaricom (NSE: SCOM). The primary objective is to raise approximately KES 149 billion (around $1.1 billion USD) by June 2026 to address widening budget deficits without resorting to new taxes on an already economically strained populace.

This strategic decision places Safaricom, widely considered East Africa’s most profitable company and a cornerstone of Kenya’s corporate sector, at the heart of the nation’s fiscal consolidation efforts. With Kenya’s public debt reportedly exceeding KES 11.4 trillion ($88.5 billion) and annual interest payments projected to surpass KES 1 trillion ($7.7 billion) by the end of the year, the government is actively seeking non-tax revenue solutions.

Treasury Cabinet Secretary John Mbadi has publicly acknowledged the potential of this divestiture, stating, “There is talk that if we could offload more of our ownership of Safaricom, we are likely to get the KES 149 billion through privatization.” This comes as tax collection targets face shortfalls and rising inflation impacts household incomes, making further tax hikes politically and economically challenging.

This planned sale would be the first major government divestiture in Safaricom since its landmark Initial Public Offering (IPO) in 2008. That IPO saw 10 billion shares offered to the public, generating KES 51.75 billion (approximately $400 million at the time) and was oversubscribed by 532%.

Currently, Safaricom shares are trading at around KES 19.90 on the Nairobi Securities Exchange. Market analysts reportedly view this price as undervalued relative to the company’s strong fundamentals, presenting both an opportunity and a challenge for the government. A sale to institutional investors via an off-market block transaction could potentially unlock value at a premium. Conversely, a large public offering at current market prices might not yield the desired proceeds for the Treasury and could risk flooding the market.

Despite market fluctuations, Safaricom remains a highly attractive asset. Its continued dominance in the mobile money sector through M-Pesa, coupled with a robust data services portfolio, has ensured consistent dividend payouts. For the fiscal year ending March 2025, Safaricom reported a 7.2% profit growth to KES 45.7 billion and proposed a dividend of KES 1.20 per share. This dividend would yield approximately KES 16.8 billion directly to the government based on its current shareholding.

The decision to sell a portion of its stake involves a significant trade-off for the government: an immediate cash injection versus the loss of a consistent long-term annual dividend stream. This dilemma underscores the urgency of Kenya’s current fiscal situation.

Adding another layer of complexity is Safaricom’s ongoing expansion into Ethiopia, Africa’s second-most populous nation. Since entering the Ethiopian market in 2022, Safaricom has navigated infrastructure development challenges, regulatory hurdles, and currency volatility. However, the company’s management remains optimistic about the venture, projecting a potential 50% boost to earnings as the Ethiopian operations stabilize and mature. For potential investors in the Safaricom stake, this expansion represents both a calculated risk and a significant untapped growth opportunity.

The Kenyan government faces a delicate balancing act. Selling the Safaricom stake too hastily could result in underpricing a prime national asset, while delaying the sale could exacerbate mounting debt pressures. With the national budget set at KES 4.2 trillion and tax revenues unlikely to bridge the deficit alone, the planned Safaricom divestiture is emerging as a critical component of Kenya’s short-to-medium-term fiscal strategy and a significant test of strategic timing and execution. International private equity firms have reportedly shown keen interest in Africa’s telecom sector, attracted by stable cash flows and scalable infrastructure, suggesting potential investor appetite for the Safaricom shares.