Wednesday, January 25, 2006

Safaricom: Let's give Kenyans a chance to own a piece

By MWANGI IRUNGU
The government faces a litmus test on where it will source the Sh. 22 billion needed to lay off the 11,000 of the 18,000 Telkom staff as it restructures the loss making public company.
According to the Information and Communication Minister Mr. Mutahi Kagwe, the government is currently pumping a whooping Sh. 400 million monthly to keep the company afloat.
This figure translates to a Sh. 4.8 billion loss annually for the government which should not be allowed to happen any further.
One option that the government has of raising the cash is through the much-publicized sale of some of its 60% shares in the largest mobile phone company in Kenya Safaricom.
If the government goes ahead and implements this plan to sell part of Safaricom, it should do so through the Nairobi Stock Exchange (NSE) and not through a strategic investor like Vodafone PLC who are waiting with a predatory anticipation to cash on this venture should the government decide otherwise.
The government should learn from the success of the KCB rights issue in 2004 where the bank raised Sh. 2.35 billion through the bourse after it decided not to take up its shares. 
On the verge of collapse, Uchumi too raised Sh. 1.2 billion through the NSE silencing critics who were advocating for a strategic investor from South Africa.
The NSE Chairman Da Gama Rose early this year too urged the government to shun strategic investors and sell part of National Bank of Kenya and the Consolidated Bank through the NSE.
This will benefit Kenyans and other local investors who are beginning to appreciate the success of the stock market which previously had been benefiting a few enlightened ones.
The government should give Kenyans a chance to own part of the Safaricom instead of giving it away to foreigners who will repatriate the profit to their country and such a golden opportunity can only be done through the stock market which is on an upward trend of growth. 
In 2005, the NSE was one of the most active sectors in the country with the NSE 20 share index gaining 1,027 points to close the year at 3,973.
Nairobi Stock Exchange CEO Mr. Chris Mwebesa predicts the NSE 20 share index may hit the 5,000 mark in 2006 which is likely to create over Sh100 billion in additional wealth to the shareholders.
At the moment, the NSE 20 share index is above the 4,000 mark.
With more companies likely to list this year, namely Equity Bank, KenGen and Wananchi online the NSE story will be that of success and its no doubt that a 5,000 mark will be achieved.
With its subscriber base targeted to hit 5.5 million by the end of 2007, its no doubt that Kenyans are the true owners of one of the Kenya's jewell-companies - Safaricom.
The government should give Kenyans a chance through the NSE to own a piece of Safaricom's cake which many have not enjoyed in some of the blue chip companies in the NSE - namely EABL - where majority shareholders are foreigners, cement companies like East African Portland and Bamburi Limited.
In his budget speech last year, Finance Minister David Mwiraria gave incentives to local investor (company owners) who listed their companies in the stock market.
Any company listing 40% of its shares in the stock market to Kenyans, would be exempted a 10% corporate tax for 5 years.
This has seen an influx in the number of companies wanting to list at the NSE whose benefits are
immense.
If it wants growth at the NSE, the government should therefore aid this process of attaining a 26% growth by the end of 2007 by selling part of  Safaricom through the NSE as it is done with KenGen where it is selling its 30% stakes in the highest Initial Public Offer (IPO) ever in the country projected at between  Sh. 8-10 billion.
Should the government heed this call Safaricom's IPO would be the largest ever in East Africa, surpassing that of KenGen.
Conservative estimates indicate that it would require a cross-listing in the 3 East African Countries so as to
exhaust the offer.
But with the anticipated success of the KenGen offer, where it's believed the offer might not be enough for the number of willing investors, its almost certain that Kenyans will take up any Safaricom offer.
With Kenya Airways, East African Cables and Athi River Mining enjoying the success of listing at the
stock market, it's high time the government borrowed a leaf from these companies which are among the
most active at the bourse as their benefits to Kenyans who have invested in them is immense.
Having made a profit of over Sh. 5 billion last year, Safaricom is one of the fastest growing companies in Kenya and it's riding higher.
Homegrown economists have raised alarm on the Vodafone PLC bid to put an additional 11% stake in Safaricom at $100 million (Sh7.2 billion) which is perceived to be too low for a company whose prospects are higher. Analysts have expressed fear that Vodafone PLC might even decide to give its Safaricom stake to South African giant VodaCom where its has immense stakes to run it.
This should not be allowed to happen; Safaricom should be owned by Kenyans.

Mwangi Irungu is a freelance writer and can be reached at m_irungu@wananchi.net


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