The Kenya Bankers Association has
thrown its weight behind the government's plan to offload 15 per cent of its
stake at Safaricom saying the move will ease taxation and borrowing.
Appearing
before the joint committee gathering partners’ views on the sale of shares, the
bankers body said the country remains a high risk of external and overall debt
distress.
“We
have no objections to the proposal of partial divestiture of Safaricom PLC by
the government. We support this form of alternative funding to alleviate
pressure on tax revenue mobilisation and ease public debt accumulation which
has reached concerning levels,” the association said.
“The banking sector has been at the
forefront in advocating for reduction of taxes, especially on personal taxes
and levies to enhance disposable incomes and spur credit growth which will in
turn stimulate consumption and aggregate demand, production and economic
growth.”
The
bankers made the presentation 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 Balambala MP Shurie
Abdi, has started a partners’ engagement with regards to partial divestiture of
the government’s shareholding in Safaricom PLC.
The
government is intending to offload up to 15 per cent of its 35 per cent
controlling shares at the telco.
Already,
the government has identified a South Africa-based company, Vodacom, as the
strategic partner.
The
transaction is expected to raise Sh204.33 billion, representing a premium of
about 19 per cent over the listed share price, based on a market price of
around Sh28.5.
The
bankers said taxation and borrowing may not be relevant in the current economic,
situation insisting that the government must come up with innovative ways like
the proposed sale of shares.
“Currently
the government primarily funds its budget through domestic tax revenues
collected by the Kenya Revenue Authority (KRA). In addition, the government has
been financing fiscal budget deficit through domestic borrowing [Treasury
bonds, T-bills] and external borrowing [loans from bilateral partners,
multilateral institutions, and international capital markets],” the association
argued.
“Whereas
this model may have been optimal in the past, public expenditure demands have
accelerated faster than public revenue growth resulting in unsustainable tax
revenue mobilisation and public debt accumulation.”
Vodacom
will mobilise and access more capital for deployment in financial innovation
and technological development that will in turn support expansion and growth of
Safaricom.
INSTANT ANALYSIS
Kenya Bankers Association (KBA) is
the financial sector’s leading advocacy group and the umbrella body of the
institutions licenced and regulated by the Central Bank of Kenya (CBK) with a
current membership of 46 financial institutions. KBA continues to reinforce a
reputable and professional banking sector in a bid to best support Kenyans, who
entrust their ambitions and hard-earned resources with its member banks.
