from MARIA MACHARIA in Nairobi, Kenya
Kenya Bureau
NAIROBI, (CAJ News) – The controversy around the transaction between Kenya and the Vodacom Group, culminating in the company assuming majority control of Safaricom, reveals a recurring, troubled track record of the government’s handling of large telecommunications deals.
It is a poor streak of unpredictable management, where the desire for rapid capital injection or political control has consistently compromised the long-term stability and global reputation of the lucrative technology sector in East Africa’s largest economy.
The US$1.6-billion Safaricom transaction, which has lurched into a legal debacle after the High Court nullified it, is the latest episode in a series of bungled transactions that have consistently compromised the long-term stability and global reputation of the technology sector in recent times, in the nation dubbed Africa’s Silicon Savannah.
In October 2022, the National Treasury executed a corporate move by buying out Helios Investment Partners to make Telkom Kenya wholly state-owned. The government paid over KSh6 billion (US$50.4 million) to acquire Helios’ 60-percent stake.
The deal ignited severe political scrutiny, having accelerated shortly before the August general elections using a legal loophole that avoided parliamentary approval. A subsequent legislative probe revealed the government also inherited more than $291 million in loans as part of the takeover.
Treasury then announced an agreement for the United Arab Emirates-based Infrastructure Corporation of Africa to take over the 60-percent stake to inject capital, upgrade infrastructure and settle liabilities.
The complex acquisition and subsequent transactions have faced legal, parliamentary and investigative scrutiny regarding the transparency of the bidding processes and the assumption of multimillion-dollar loans.
President William Ruto’s administration rescinded and reversed the deal in 2023.
In 2019, the government gave conditional approval for Airtel Kenya and Telkom Kenya to merge into a singular entity, Airtel-Telkom, to create a stronger competitor against Safaricom’s dominance.
The proposed joint venture, which excluded Telkom’s prime real estate portfolio and specific strategic government communications contracts, collapsed in 2020 after Telkom Kenya opted out of the merger.
Regulatory delays, stringent conditions and complications around government approvals led to the collapse of the deal.
Telkom Kenya’s business has contracted severely, with the government the sole owner.
“The government’s track record in handling large telecommunications deals can be described as legally reckless, regulatory chaotic and driven by short-term political and fiscal expedience at the expense of sound corporate governance,” commentator, Auta Ibrahim, said.
He noted the High Court’s invalidation of the Safaricom-Vodacom stake sale cited a lack of legally required public participation and arbitrary valuation, and similarly, the Telkom nationalisation bypassed Parliament right before an election, showing a repeating pattern of avoiding institutional checks and balances.
On a positive note, the consistent legal disputes demonstrate that Kenya’s judiciary acts as an aggressive watchdog against state overreach in the corporate sector, the analyst stated.
The National Treasury, late Wednesday, confirmed it would appeal.
John Mbadi Ng’ong’o, Cabinet Secretary: National Treasury, stated the institution remained confident that the process followed the law and was in line with prudent financial management in line with the nation’s fiscal realities.
He said the divestiture was conceived, developed and presented to Cabinet and the National Assembly as a considered fiscal measure, structured to unlock value for the Exchequer while safeguarding the strategic character of an institution that touched the daily lives of over 50 million Kenyans.
“The National Treasury is studying the full judgment closely and will shortly set out, through the appropriate legal channels, the grounds on which we consider the court’s findings merit further judicial review.”
Ng’ong’o argued the right to development was balanced alongside every other obligation the Constitution placed on the State, not set against it.
The official said Treasury rejected that the safeguards built into this transaction, including the protections extended to Safaricom’s employees, dealers and business partners, amounted to the constitutional and procedural failures as the court had asserted.
“The National Treasury will pursue this appeal vigorously and provide further updates as the matter progresses through the courts,” Ng’ong’o concluded.
– CAJ News