In a packed Nairobi courtroom on 15 September, three judges, Francis Gikonyo, Roselyne Aburili and Tabitha Ouya, handed down a decision that sent a ripple through two of Africa’s biggest telecom groups. The ruling declared the sale of a 15% ownership share (stake) in Safaricom, East Africa’s leading mobile-network operator, to South Africa’s Vodacom invalid and ordered the shares to be returned to the Kenyan government.
The court said the transaction breached public-finance management laws and failed to meet public-participation requirements. It also found that the deal amounted to a takeover, a change of control, that was never disclosed to the public and had not been cleared by the Competition Authority. In the judges’ words, the divestiture was “invalid, null and void”.
Vodacom responded by text message, confirming that it will lodge an appeal with the Court of Appeal and will apply for a stay, a temporary halt, while the appeal is considered. The company framed the move as an “interim step” and did not comment on the merits of the judges’ findings.
Investors reacted quickly. In Johannesburg, Vodacom shares slipped almost 4%, the steepest decline since 27 July, before clawing back some of the loss. Across the border, Safaricom shares rose as much as 2.2% during Kenya‘s trading session, reflecting market optimism that the dispute could be resolved without further damage to the operator.
Background to the disputed transaction
In December, Vodacom agreed to increase its holding in Safaricom from roughly 40% to about 55%, reducing the Kenyan Treasury’s residual interest to 20%. The deal was completed on 30 June, after a conservatory order, a court-issued freeze on the transaction, was lifted by the Court of Appeal and all conditions precedent were satisfied, according to Vodacom.
The sale raised approximately 204.3 billion shillings (about $1.6 billion) and included a further 40.2 billion shillings from the securitisation of future dividends, a financial engineering technique that turns expected dividend payments into upfront cash. Transaction advisory services were provided by KCB Investment Bank Ltd, a move the judges said contravened Kenyan law.
The judges highlighted several specific breaches: the government did not follow a competitive selection process for the buyer, critical documents such as the share-purchase agreement and dividend-rights purchase pact were not made public, and the upfront monetisation of future dividends was deemed unconstitutional because it stripped citizens of their dividend rights. They also warned that handing control of a strategic asset to a foreign shareholder could threaten national security.
If Vodacom’s appeal fails, Kenya, already strapped for cash, may have to return roughly $1.9 billion (R31 billion) that it received for the stake. That sum represents a sizable portion of the funds President William Ruto‘s administration plans to channel into a $39 billion infrastructure pipeline covering railways, airports, roads, power lines, dams and irrigation projects. A shortfall could force the government to re-evaluate the timing or scale of those projects, which many small and medium-size enterprises rely on for growth.
What remains unknown is how the appellate court will interpret the lower court’s findings and how long any stay of the decision might last. Vodacom has not disclosed alternative strategies should the appeal be dismissed, nor has it indicated whether it would seek to unwind the transaction or pursue a new purchase process.
For South African investors and businesses that depend on Vodacom’s regional network, the immediate risk is limited to share-price volatility. However, the broader implication is a reminder that cross-border acquisitions in Africa are increasingly subject to rigorous public-interest scrutiny. Companies eyeing similar deals may need to factor in longer legal timelines, transparent tender processes and explicit regulatory approvals to avoid costly reversals.
