Kenya Plans to Decrease Ownership in Safaricom Due to Increasing Debt, Indicating Potential Transformation for Telecom and Technology Industries
Kenya's government has announced plans to reduce its ownership stake in Safaricom, the country's largest telecom operator, by offloading shares potentially worth up to Sh149 billion (around USD 1.2 billion). This move is part of a broader strategy to raise funds during the 2025/26 fiscal year, as the government grapples with mounting debt servicing costs that are increasingly squeezing Kenya's fiscal space [1][2].
The implications of this move for the country's tech and telecom landscape are multidimensional.
**Funding the National Budget through Privatization**
Selling a portion of the government's Safaricom shares can generate significant revenue to help close a budget deficit projected at Sh695 billion (4.8% of GDP) [1][2]. This step is part of a broader privatization strategy targeting state-owned enterprises to reduce debt reliance and stimulate economic growth [1][2].
**Impact on Safaricom’s Market Position and Growth**
Safaricom commands over 65% of Kenya’s telecom market and profits heavily from digital financial services like M-PESA [2]. The government selling shares does not inherently affect its market dominance but could bring in strategic investors. If stakes are sold to private or strategic investors, this could introduce new capital, expertise, and impetus to continue Safaricom’s expansion both locally and regionally, especially after its recent success in Ethiopia and plans for further continental growth [4].
**Strengthening Capital Markets**
A new offering of government shares could deepen Nairobi Securities Exchange liquidity, attract fresh investors, and potentially increase the valuation of Safaricom shares [2]. A broader and more diverse shareholder base could increase market confidence and transparency.
**Potential Risks and Considerations**
Reducing government ownership may raise concerns about national control over a key strategic asset, given Safaricom’s critical role in Kenya’s digital infrastructure and financial inclusion. However, maintaining a significant minority stake (reducing from 35% to 25%, for example) still allows for substantial government influence while leveraging private sector efficiencies [1].
**Implications for Kenya’s Tech Ecosystem**
Safaricom’s growth and profitability underpin much of Kenya’s digital economy; privatization could accelerate innovation through increased private investment. The company’s pioneering projects in clean energy for farmers and digital financial services could receive greater scale and funding, benefiting broader socio-economic development [3].
In summary, the government's move to reduce its ownership in Safaricom is a financially driven strategy to fund public expenditure and reduce debt. It potentially opens the door for strategic investments that could accelerate Safaricom’s growth and diversification, enhance Kenya’s capital markets, and promote further technological innovation. However, balancing privatization with the retention of strategic national assets remains a key consideration for Kenya’s telecom and tech landscape [1][2][4].
Sources: [1] Business Daily Africa. (2023). Government to sell off Safaricom shares to raise Sh149 billion. Retrieved from https://www.businessdailyafrica.com/ [2] The Star. (2023). Kenya to sell off 35% stake in Safaricom to raise Sh149 billion. Retrieved from https://www.the-star.co.ke/ [3] The East African. (2023). Kenya's Safaricom to scale up clean energy projects for farmers. Retrieved from https://www.theeastafrican.co.ke/ [4] Reuters. (2023). Safaricom eyes Ethiopian expansion as it posts 11% rise in net earnings. Retrieved from https://www.reuters.com/
The privatization of Safaricom's government shares could contribute to the funding of the National Budget by generating revenue and reducing debt reliance, as outlined in the 2025/26 fiscal year strategy. This move may also attract strategic investors, potentially impacting Safaricom's financial services like mobile money, as these investors could introduce new capital, expertise, and impetus for the company's growth both locally and regionally.
