Shares Restored: High Court Orders the Safaricom Stake Back to the State

On 15 September a three-judge bench of the High Court nullified the sale of the government's 15 per cent stake to Vodafone Kenya, the vehicle for Vodacom.

Justices Francis Gikonyo, Roselyne Aburili and Tabitha Ouya said there had been no reasonable public participation, that material information had been concealed, and that the pricing was arbitrary. They ordered the shares restored to the government on behalf of the people.

The price had been KSh 204.30 billion, about $1.60 billion at the rate used in the deal, or KSh 34 a share. The state also took about KSh 40.70 billion for the future dividend rights on the 20 per cent it was keeping.

We noted in September that Safaricom was reading the ruling. This is the order itself. The bench called the arrangement a camouflaged merger and takeover.

It said a single foreign-controlled shareholder would hold 55 per cent, and that the deal therefore sat under the takeover, merger and competition rules, which had not been followed. The parliamentary approval was quashed with the rest.

What 55 per cent means for the phone in your pocket

Safaricom is the company behind M-PESA. Control of it is not a line on a share register that only a broker reads. A shareholder with 55 per cent can set the board. The court said that concentration, reached by a sale the public did not properly see, was the defect. Restoring the 15 per cent would put the state back above a blocking stake and take Vodacom back below a majority, if the register is actually rewritten.

A ruling is not a transfer. The shares were moved on 30 June, after the Court of Appeal lifted an earlier block. Putting them back needs a registrar, a payment in reverse, and time. Until that entry is made, the legal owner and the registered owner can be different people. A retail investor who bought Safaricom on the exchange is not being asked to return anything. The fight is over the block the state sold, not over the shares in a CDS account.

The money the sale was meant to raise

The KSh 204.30 billion was part of the plan to fund an infrastructure fund by selling state assets. A nullified sale puts that money in question. If the shares come back, the cash has to go too, or the state is holding both. If an appeal stays the order, the 55 per cent stands while the case runs. The Treasury has said it will challenge the judgment. Until a higher court speaks, the practical position is the one on the register, not the one in the speech.

The test for a reader is simple. Has the 15 per cent moved back? Until the answer is yes, the ruling is an order, not a fact on the cap table.