A telecoms flotation has revived confidence in the Nairobi stock market
The floating of a 25% equity stake in one of Africa’s most successful companies – Safaricom cellphone company – on the Nairobi stock exchange in March has given the Kenyan economy a huge boost after three months of political crisis.
Safaricom’s IPO (initial public offering) was launched on March 28, and 10 billion shares were priced to sell at Ksh5 each; the exchange rate averaged $1/Ksh63 in March, after recovering strongly after falling to $1/Ksh80 at the height of the political crisis.
A further 3.5 billion shares in Safaricom are reserved for foreign buyers, who will pay a premium above the effective 14% discount that Kenyans enjoyed.
The Kenyan government, which had a 60% stake in Safaricom, offered 25% of the equity for sale, leaving it with a minority holding of 35%. The remaining 40% is owned by Vodafone Kenya, a subsidiary of the UK’s Vodafone.
Safaricom’s first attempt at an IPO last year was blocked by opposition MPs who accused the government of president Mwai Kibaki of using the deal to raise funds for the December election.
Corruption calls
Anti-corruption campaigners also pointed to a lack of disclosure about a company called Mobitelea Ventures, which controls a 5% stake in Safaricom via a 10% stake in Vodafone Kenya and has been linked to former president Daniel arap Moi and his political ally Nicholas Kipyator Biwott.
Last year, the Serious Fraud Office in London opened an investigation into the role played by Vodafone and tactics used by Mobitelea in negotiating a cellphone licence in Kenya from the government more than a decade ago but made little progress with the probe. Vodafone denies any financial impropriety in its operations in Kenya.
The Safaricom offering closed on April 23 and the Kenya government is expected to have raised about Ksh50 billion ($806 million) which it says it will use to finance development programmes.
Safaricom reported a net income of Ksh12 billion for the year ending March 31, 2007 and claimed to have some 10 million subscribers. This would give it a market share of about 80%.
For Amos Kimunya, the finance minister, the Safaricom IPO has a wider importance. It sends a signal to the international markets that Kenya has pulled itself out of the political chaos. “The market capitalization stands at KShs800 billion and is set to surpass the Ksh1 trillion mark after this offer,” said Kimunya.
The successful IPO will also boost political confidence in Nairobi’s stock market, which was the target of much criticism for its closed financial relationships as well as the dominance of many of Kibaki’s allies in the market, local stock broking companies and banks.
There has also been progress in two of the fibre-optic cable systems that will link Kenya to the global telecommunications networks without the need for costly satellite links.
Work is starting this year on both the $110 million East African Marine System cable (which runs from Mombasa to Fujairah in the UAE) and the $247 million East African Submarine System which involves 21 states and six development banks.
Both link-ups are due to be operational by 2010. —PS