Scramble for Safaricom: Who is Fooling Who?

Published on 2nd October 2007

As many of us prepare our hard earned cash to own part of the upcoming Kenyan crown jewel: Safaricom, some are quickly rushing to sell off the 25 percent whilst others want the courts to halt the sale until the ownership has been resolved.

 

Proponents of the sale argue that those seeking to stop the sale are sabotaging the government’s developmental record, malicious and are out to gain political mileage. Critics have even advanced a fallacy that the Orange Democratic Movement's presidential aspirant, Raila Odinga, is fighting the NSE since he is a communist. They forget that the dispute involving Safaricom has been around for over a year as attested by the Public Accounts Committee.Others see the disputed percentage as negligible notwithstanding that it is currently worth over 1billion shillings. 

 

Opponents want the sale halted because the two year old Privatization Act 2005 which should govern the disposal of public enterprises has not been operationalized. They also point out that Telkom Kenya's shareholding in Safaricom belongs to Kenyan taxpayers who should have the last say on privatization via their parliamentary representatives. Some see the IPO rush a carrot to win votes during the December 2007 elections.

 

Why is much fuss attached to this IPO yet the ones that preceded it went smoothly?  To answer this, one needs to address the Safaricom ownership structure.

 

The company was formed in 1997 as a fully owned subsidiary of Telkom Kenya. In May 2000, Vodafone group Plc, acquired a 40 percent stake changing the current ownership to 60:40 percent.  By 2006, the company’s estimated worth was about $2bn. Nonetheless, some estimate it to be as high as $6bn depending on the valuation model used.  In March 2007, the company declared a pre-tax profit of 17.19 billion shillings, up by 40 percent the previous year, making it the highest ever by an East African company.  The government intends to float 25 percent of its shareholding before the end of 2007 in the NSE and perhaps other stock markets. This is however unlikely due to the rush to sell.

The contention on Safaricom ownership structure revolves around a third mysterious company called Mobitelea whose records are unavailable in Kenya’s company house.  A quick background check reveals that it was registered on the 18th of June 1999 in Guernsey under two nominee companies, shortly after Vodafone’s deal with Telkom.

It is unclear how Mobitelea came to acquire an initial 10 percent of Safaricom shareholding and later disposed off 5 percent.  Equally,  the worth of their shareholding then and now; its ownership; payment of dues to the government; role in the  Vodafone acquisition of Safaricom shareholding; and why it disposed off the 5 percent immediately the NARC government came into power are all unclear.

Attempts by the Public Investment Committee to unravel these questions were met with un-co-operation and misinformation.  Due to this, they recommended stopping the Safaricom sale.

Interestingly, available evidence indicates that the 40 percent Vodafone PLC shareholding is owned by Vodafone Kenya.  This company is owned by Vodafone U.K (87.5 percent) and Mobitelea (12.5 percent).  Thus, Mobitelea indirectly owns the 5 percent of Safaricom via Vodafone Kenya

To get to the bottom of Mobitelea ownership, one needs to look at who the company’s shareholders are. Alas, checks with the Kenyan and Guernsey registrar of companys hit a dead end. The former rudely declined to acknowledge the company’s existence or registration in Kenya. The latter disclosed  the company’s registration in 1999 by two nominee shareholders, that is, Mercator Nominees Ltd and Mercator Trustees Ltd but could not reveal further details citing Data Protection and client confidentiality.

Astonishingly, a closer look at the shareholding of these two companies reveals that they are also owned by more than 20 different nominee companies registered across the globe.

This limited evidence goes to show the painstaking and concerted effort made to conceal the true identity of Mobitelea shareholders. It further raises the question on the motivation of those concerned. In equal measures, these actions lift the bar of suspicion of a cover by those in the know. Indeed, Mobitelea’s non-existence in Kenya prior to Safaricom formation is contrary to Vodafone UK’s insistence that they were co-opted because of their operations, understanding and experience of the Kenyan business environment. Undoubtedly, it is evident that other unknown reasons were behind this co-option.

Consequently, the onus of unmasking Mobitelea’s questions lies with Vodafone UK. This does not absolve the government from its constitutional and moral obligations.  What is lacking is the political will to enforce zero tolerance against corruption; protect  taxpayer’s money a the president’s inauguration speech.  To understand this unwillingness, one need not go further than the tepid response to the Goldenberg and Anglo-leasing scandals and the hounding out of the anti-corruption czar from the permanent secretary’s office. These few examples give a clear indictment to the public and international community on which side the government is.


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