ICPAC, Tespok question Safaricom shares pricing, claim country getting raw deal

Experts have questioned the valuation of Safaricom shares proposed for sale, warning the Sh34 per share price amounts to a raw deal for Kenyans.

The Institute of Certified Public Accountants of Kenya (ICPAK) and Technologies Service Providers Association of Kenya (Tespok) faulted the ‘opaque’ pricing of shares adopted in the proposed sale of shares.

The accountants’ organisation said the valuation process lacks transparency and risks short-changing the public, insisting there could be better deal.

ICPAK called for the engagement of independent, reputable valuers to determine the true worth of the shares and guarantee value for money.

“The proposed price of Sh34 per share has not been accompanied by a clear explanation of the valuation methodology, raising concerns over price discovery and accountability,” ICPAK national chairperson Elizabeth Kalunda told MPs.

“If not addressed, this will fuel the perceived concern that the offer price is below Safaricom’s all-time high of Sh44.7 in 2021, reinforcing public perceptions that the asset may have been sold below its intrinsic value.”

Tespok challenged the government to publicly disclose comprehensive valuation report to give credibility to the process.

“The credibility of the exercise hinges on absolute transparency in the valuation methodology and timing. A transparent process will maximise public trust, achieve fair value for the national asset and bolster investor confidence in Kenya’s capital markets,” Tespok said in its submission to Parliament.

The two organisations were on Wednesday appearing before the joint sitting of the Finance and National Planning and Public Debt and Privatisation committees of the National Assembly.

The committee jointly chaired by Kuria Kimani (Finance) and Shurie Abdi (Balambala) is currently engaging stakeholders with regards to partial divestiture of the government’s shareholding in Safaricom PLC.

The partial divestiture is meant to raise funds for viable commercial infrastructure projects in the energy, roads, water and airports.

In the proposed arrangement, Vodafone Kenya will acquire 15 per cent of the government’s 35 controlling shares at the telco amounting to six million shares at Sh34 per share valued at Sh2004.3 billion.

According to the accountants’ body, the valuation was not transparent and the authorities did not provide the methodology used.

“In the Safaricom transaction, the per-share price of Sh34 was set without publicly disclosed methodology. Independent or third-party validation is minimal,” the institute said in a document table before MPs.

“We don’t know what happened behind the closed doors, this is not a transparent trading. Whenever you are doing any valuation you must look at the future expectations. Looking at the future of the country, the value is beyond what is being offered.”

The concerns add to growing scrutiny over the proposed sale, with the institute arguing that rushing the transaction could lead to massive losses for taxpayers.

ICPAK urged the government to pause the process until an objective assessment is conducted.

“There should be no rush, a lot of discussion needs to be done around this,” the organisation said.

ICPAK now wants the government to provide a transparent explanation of the pricing methodology, clearly stating the reference price and the calculation of the premium.

The institute is also recommending that the government adopts privatisation methods that deepens Kenya’s capital markets, particularly through public offerings and listings on the Nairobi Securities Exchange.

“The government should ensure the entire share sale process is guided by a balanced consideration of national strategic interests and fiscal requirements, so that revenue raising objectives do not undermine long-term economic and developmental priorities,” ICPAK recommended.

“Divestiture of strategic national assets should be permitted only as a last resort, after demonstrating that all alternative financing and revenue-mobilisation options have been fully explored and exhausted.”

The committee also met other agencies including the Capital Markets Authority (CMA) and Communication Authority (CAK) as it continues with its stakeholders’ engagement.

Appearing before the joint team, the regulators welcomed the sale of part of the government’s stake in Safaricom, saying the price was competitive and the transaction is unlikely to negatively affect the market.

“Divestiture of non-core commercial functions allows the government to concentrate managerial capacity and public expenditure on priority service areas, including infrastructure, health and education,” CMA chief executive officer Wycliffe Shamiah told the MPs.

“It is the authority’s preliminary view that the divestiture and the associated change in ownership will occur at the shareholder level and are not expected to result in any change to the existing market structure,” CAK director David Kemei said.

INSTANT ANALYSIS

The Institute of Certified Public Accountants of Kenya is a statutory body of accountants established under by the Accountants Act CAP 531, mandated to develop and regulate the Accountancy Profession in Kenya and advise the Cabinet secretary on matters relating to financial accountability in all sectors of the economy.