Kenya's High Court on Tuesday threw out the government's Safaricom share sale, finding that the constitution does not recognize divestitures as a way for the state to raise revenue. Judges also took issue with how the price was set, saying officials settled on 34 shillings per share before hiring a transaction adviser. That made the valuation arbitrary, the court said, and it deprived Kenyans of a shot at a better price for a public asset.
The bench also criticized the plan to send the proceeds into the National Infrastructure Fund, arguing the fund does not ringfence money for specific projects.
Transferring the Safaricom stake to Vodacom was supposed to provide $1.9 billion in starter cash for the newly formed National Infrastructure Fund to bankroll a seven-year slate of projects. Separately, the Treasury has already taken in $820 million through the Kenya Pipeline Co. IPO earlier this year.
The NIF's plan was to leverage those proceeds to pull in about tenfold additional funding from pension funds and banks. This sits alongside a broader pivot by the government toward selling state assets and securitizing future tax revenue to fund projects in a $141 billion economy.
Vodacom and Kenya's Treasury both said they will appeal. With elections less than a year away and President William Ruto seeking a second term, analysts said the administration may lean more on borrowing to keep construction going or scale back plans.
Edward Bach - senior Africa analyst with the risk-intelligence firm Verisk Maplecroft - said, referring to the National Social Security Fund, "Ruto will try to plug the gap by leaning on further public-private partnerships and the NSSF, though this is highly unlikely to be sufficient," "Ruto's ambitions and the Fund will need to be significantly scaled back."
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The government, which has limited room to raise taxes, is expected to keep tapping markets. "Our base case is increased borrowing from both domestic and external markets," said Stellar Swakei, who covers macro, fixed income, and banking at Renaissance Capital Kenya. Churchill Ogutu, who leads research at Nairobi-based Capital A Investment Bank, said the government could tilt toward additional pay-per-use initiatives like toll roads, adding, "They'll revert to capital markets financing, securitization and definitely borrowing as they resolve the legal issues."
By 1:27 p.m. in Nairobi, Safaricom was down 4.7%, while Vodacom in Johannesburg declined by as much as 2.7%.
The ruling puts a roadblock in front of a $39 billion infrastructure push right when tax options are thin. If borrowing fills the hole, more of the load could shift to capital markets while legal questions get sorted, and policy risk stays in the spotlight for big names tied to the plan.
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