Gov't to spend Ksh.3B on advisors in planned sale of 15% Safaricom stake

The government is set to spend over Ksh.3 billion on transaction advisors and lawyers in the sale of its stake in Safaricom, a deal that will see the State offload at least 15 per cent of its shares.

Appearing before a joint sitting of Parliamentary committees on Finance, National Planning, Public Debt and Privatisation, Treasury Cabinet Secretary John Mbadi defended the move to allow Vodafone to be the sole buyer of the more than six billion shares held by the government.

Mbadi sought to clarify with members of the two committees, who put him to task on why the government could not take a competitive bidding route.

“It looks like you have already made up your mind to sell to Vodafone for the reasons you have told us, but don’t you think it is unfair to others who would have wanted an opportunity to also have these shares?” Chesumei MP Paul Biego said.

Kitui Rural MP David Mboni on his part posed; “The sale of this 15 per cent will change the whole ownership structure. Vodafone will have 55 per cent, and the protection is only for three years, so what happens after three years?”

“The more reason why we went for this established partner who is in this space is to safeguard against business disruption. If we went for someone else, there would be a possibility of such disruption,” Mbadi responded.

The CS further cited the sheer size of the transaction as another reason why Vodafone was an appropriate choice for the government.

“This is a journey that once we conclude, we expect a fat cheque from Vodafone of Ksh.244.2 billion — one fat cheque that will come to our consolidated fund, where we will seek the approval of this House to appropriate it,” stated Mbadi.

Committee members further raised concerns over public participation, protection of minority shareholders, data security once the transaction is complete, staff welfare, foreign exchange risks, and whether the funds would be ring-fenced for infrastructure.

Legislators also questioned why the government must offload 15 per cent, which will give Vodafone a controlling stake, and why it could not reduce the percentage to avoid ceding control.

“It is now very clear that the funds will go to the consolidated fund. Can you tell this committee how you will secure the funds so that they go to the intended purpose?” Baringo North MP Joseph Makilap said.

His Nyaribari Masaba counterpart Daniel Manduku posed, “Are you assuring this House that you will fast-track the enactment of the NIF or, in its absence, ensure that these funds will be ring-fenced?

Kesses MP Julius Rutto added, “What is the certainty that after finishing with Safaricom in two years or one year to come, we will not come back seeking additional space to borrow?”

In his response, Mbadi said, “This money is not for budgetary support; it is not to fill our fiscal deficit. It is going to be used exclusively to set up the seed capital for the NIF.”